Oil prices dropped below $107 per barrel this morning as the prospect of easing sanctions on Iran looked more likely.

This weekend Iran agreed to curb its nuclear weapons activity from 20 January in a deal with six world powers. The country could be able to export much more of its oil than under the punishing sanctions.

Gary Hornby, Energy Market Analyst at Inenco told ELN: “The oil price did take a bit of a dive this morning but it’s been roughly about this level for the past four or five days. This morning’s news of the Iran deal over the weekend just helped things a little bit further.”

He said the oil price has fallen over the last few weeks and “dropped away quite sharply as we came back from the Christmas break”.

The Iran news wasn’t the “sole” reason for the move though: “There’s a combination of things. Libyan production is also coming back online as well and things in South Sudan seem to be calming down a little bit.”

Looking ahead prices could continue down towards the $100 per barrel mark, he added: “The gut feeling generally is we think prices might have a bit more room to fall lower before they go back up again. Not only have you got a supply situation in the Middle East which looks with this Iran deal as if it’s going to be better but American oil production is due to keep increasing at the start of this year.”

Oil production levels in America have been at the highest level since the late 1980s he said, adding: “From what we understand, their shale oil production is due to go up as well so that might actually put further pressure on prices.”

Earlier today Iran’s Oil Minister Bijan Namdar Zanganeh said he did not expect any major change in oil price this year, adding Iran will propose OPEC reduces production if oil prices fall dramatically, reported Iranian news agency IRNA.