Oil prices slumped to a 2003 low below $28 per barrel on Monday as the market anticipated a rise in Iranian exports after the lifting of sanctions against Tehran over the weekend.
Responding to Tehran's compliance with a nuclear deal, the United States and major powers revoked international sanctions that had cut Iran's oil exports by about 2 million barrels per day (bpd) since their pre-sanctions 2011 peak to little more than 1 million bpd.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), issued an order on Monday to increase production by 500,000 bpd, the country's deputy oil minister said.
Worries about Iran's return to an already oversupplied oil market drove down Brent crude to $27.67 a barrel early on Monday, its lowest since 2003. The benchmark was down 29 cents at $28.64 by 1850 GMT.
U.S. crude was down 48 cents at $28.94 a barrel, not far from a 2003 low of $28.36 hit earlier in the session. Trading volumes were thin with U.S. markets closed for the Martin Luther King Day holiday.
"You can't say this was unexpected but the Iran news is an additional factor that's working against oil prices," said TD Securities analyst Bart Melek, who also pointed to global oversupply and concerns about demand from China.
He said oil could fall further if Chinese economic data released overnight, including GDP and retail sales data, points to more weakness in the economy.
"If we get nasty economic numbers from China there's potential for another swoosh lower," Melek said.
Analysts expect Iran will realistically be able to export an extra 500,000 bpd in the short term from storage, but there are doubts whether the state of Iran's oil infrastructure will allow further boosts anytime soon.
SEB Markets assumes Iranian oil output will rise by 400,000 bpd to 3.2 million bpd in 2016, while Tehran has said it will add 1 million bpd to its existing output by the year-end.
Iran has at least a dozen Very Large Crude Carrier super-tankers filled and in place to sell into the market.
In a sign of the pain low prices are inflicting on oil producers, OPEC forecast that supply outside the organisation would decline by 660,000 bpd in 2016, led by the United States. Last month OPEC predicted a drop of 380,000 bpd.