One of several factors contributing to the sharp drop in global oil prices in recent months has been optimism about a deal over Iran's nuclear capabilities. Despite Tehran's denials, fears the country is developing nuclear weapons has kept the international benchmark price for crude oil above $100 a barrel for nearly three years.
A new round of talks over Iran's nuclear program begins in Geneva on Thursday. Iran's top negotiator has said it is possible that there could be a preliminary deal as early as this week, which could have a dramatic impact on oil prices—and U.S. consumers.
"There's a $10-to-$15 'risk premium' in the price of oil, and it's been there for quite a while—just related to what's going on with Iran, its nuclear program and the West's reaction to it," said Addison Armstrong, senior director of market research at Tradition Energy, an energy management advisory firm in Stamford, Conn. "So any progress that they make that starts to take away some of that concern about Iran helps to lower the price of oil."
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Brent crude prices have tumbled more than $10 a barrel since late August—from $117 a barrel to near $105 a barrel on Wednesday.
International sanctions aimed at curbing Iran's nuclear program have halved the country's oil exports, which topped 2 million barrels a day at the beginning of 2012. But more moderate leadership from Iran's new president, Hassan Rouhani, who took office in August, has eased tensions and raised expectations that sanctions may be rolled back.