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Oil prices down in Asia on strong dollar, supply worries
[SINGAPORE] Oil prices declined in Asia Monday on a stronger dollar and concerns a supply glut will worsen following a landmark deal that will allow Iran to increase its crude exports.
US benchmark West Texas Intermediate (WTI) for August delivery fell seven cents to US$50.82 and Brent crude for September dipped five cents to US$57.05 a barrel in late-morning trade.
The dollar was firm in Asian trade Monday with investors focussing on the timing of a US interest rate increase after debt-stricken Greece reached a bailout agreement with creditors.
It rose against the Japanese yen and was steady with the euro after pushing to a three-month high against the single currency on Friday.
A strong US currency makes dollar-priced oil more expensive, denting demand and leading to lower prices.
Lingering concerns about a return of Iranian oil to the international market kept up the pressure on prices.
Last week, WTI tumbled 4.0 per cent and Brent retreated 3.0 per cent after Iran and six world powers agreed a deal curbing Tehran's nuclear programme that aims to prevent it building an atomic bomb.
In return, the west will lift crippling economic sanctions and allow Iran to ramp up crude exports in a market already awash with supplies.
"Although the landmark deal between Iran and the big six would increase crude oil supply only in the medium term, oil prices will remain weak in the near term as Iran starts to offload crude and condensate that it holds in floating storage," said Sanjeev Gupta, who heads the Asia-Pacific Oil and Gas practice at professional services organisation EY.
Leading global energy information provider Platts estimates that the first Iranian oil release will come from roughly 40 million barrels of crude and condensate in the Persian Gulf.
Iranian officials "also think they can export an additional 500,000 barrels per day of crude within months of sanctions removal and then another 500,000 barrels per day after that", Platts said last week.
Iran currently exports around a million barrels of crude per day, less than half the 2.2-2.3 million it sold overseas before the sanctions were imposed in mid-2012, according to Platts.