Oil prices tumbled more than $1 on Tuesday after Iran and six global powers reached a landmark nuclear deal that would see an easing of sanctions against Tehran and a gradual increase in its oil exports.
Iran and the six powers have reached a deal that will grant Tehran sanctions relief in exchange for curbs on its nuclear programme, Iranian and Western diplomats said.
"Yes, there is agreement," said a Western source, who declined to be identified. There were no immediate details on how sanctions would be eased on oil.
A spokeswoman for the European Union said the foreign ministers of Iran and the six powers - Britain, China, France, Germany, Russia and the United States - would meet for nuclear talks at 0830 GMT at the United Nations centre in Vienna, followed by a news conference.
Front-month Brent crude futures LCOc1 had dropped 95 cents to $56.90 a barrel by 0740 GMT. U.S. crude CLc1 was trading down $1.10 at $51.10 per barrel.
Analysts say it would take Iran many months to fully ramp up its export capacity following any easing of sanctions. But even a modest initial increase would be enough to pull international oil prices down further as the market is already producing around 2.5 million barrels per day above demand.
"Even with a historic deal, oil from Iran will take time to return, and will not be before next year, most likely the second half of 2016," Amrita Sen, chief oil analyst at London-based consultancy Energy Aspects, told Reuters.
"But given how oversupplied the market is with Saudi output at record highs, the mere prospect of new oil will be bearish for sentiment."
Sanctions on the Islamic Republic have almost halved its exports to a little over 1 million barrels per day. A deal ending sanctions could see Iran increase its oil exports by up to 60 percent within a year, a Reuters survey of analysts said.
"Sanctions have crippled Iran's oil production, halving oil exports and severely limiting new development projects. The prospect of them being lifted is creating great excitement ... as foreign trade and investment will allow Iran to make huge efficiencies and drive down the cost of production," said Sarosh Zaiwalla, a London-based sanctions lawyer.
(Additional reporting by Hennning Gloysten in Singapore; Editing by Dale Hudson)