Skepticism of Iran deal keeps oil’s drop modest

World oil prices Monday ended modestly lower as skepticism about the international agreement on Iran kept prices from falling significantly.

U.S. benchmark West Texas Intermediate for January delivery finished 75 cents lower at $94.07 a barrel on the New York Mercantile Exchange after earlier dropping to $93.08 a barrel.

European benchmark Brent oil futures for January delivery slipped 5 cents to $111.00 a barrel after earlier getting as low as $108.05 a barrel.

Oil had intially retreated more sharply on Sunday’s deal, in which major powers and Iran agreed to some modest sanctions relief in exchange for tighter oversight of Iran’s nuclear program while the parties try to hash out a more comprehensive accord on Iran.

Nevertheless, most sanctions on Iran remain in place, including the critical provisions that restrain Iranian oil investment.

Remaining challenges

Although Sunday’s deal is “an important first step that could eventually lead to the normalization of relations between Iran and the west,” a final deal removing the most important sanctions “remains challenging given that some key stakeholders could act as spoilers,” Barclays said in a note.

Barclays predicted the downward shift in oil prices after the deal “could be short lived,” given that a December 4 meeting of the Organization of Petroleum Exporting Countries could lead to lower output.

“You’ve got to take this headline with a healthy dose of skepticism,” said industry analyst Stephen Schork in the Schork Report.