By Libby George
LONDON (Reuters) - Brent crude futures plunged more than 4 percent to fresh 12-year lows on Friday as the market braced for increased Iranian oil exports, with the lifting of international sanctions possible within days.
Brent and U.S. crude oil were on track to close lower for a third consecutive week, down roughly 20 percent from their 2016 highs.
The International Atomic Energy Agency (IAEA) could issue its report on Iran's compliance with an agreement to curb its nuclear programme during a Friday meeting in Vienna, potentially triggering the lifting of Western sanctions.
U.S. crude futures (CLc1) were down by more than 4.5 percent at $29.67 per barrel at 1219 GMT, after posting their first significant gains for 2016 in the previous session. The contract hit $29.39, their lowest since November 2003.
The March Brent (LCOc1) contract was down $1.15 at $29.73 a barrel. It hit a session low of $29.43, its lowest since February 2004.
The February Brent contract, which expired on Thursday, closed higher for the first time this year at $31.03 per barrel.
On Friday, the average price for a basket of OPEC crudes fell to $25 per barrel, even before unrestrained Iranian exports hit the market.
"The key theme for 2016 will be real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016," Goldman said in a report.
Others were more concerned about the impact of new exports from Iran. While experts warned that not all sanctions may be lifted immediately once the agreement on its nuclear programme came into effect, any additional oil would add to a glut that has pushed prices into a deep slump since mid-2014.
"In the very short term, another price drop cannot be excluded in particular after sanctions against Iran are being lifted," Commerzbank (DE:CBKG) analyst Carsten Fritsch told Reuters Global Oil Forum.
"That means a drop towards $25 is quite possible, but not much lower than that."
Commerzbank and BNP Paribas (PA:BNPP) on Friday cut their 2016 forecasts for oil prices; the former revised its year-end expectation for Brent to $50 per barrel, down from $63, while the latter, citing economic risks, said it now expected Brent to average at $37 per barrel in 2016, $17 lower than an earlier forecast.
The oil price collapse has already hammered currencies from commodity-producing nations and spooked financial markets as investors worry about the health of the global economy. [MKTS/GLOB]
Nigerian stocks were set to post their biggest weekly drop in a year on Friday, while Russian energy minister Alexander Novak said that the critical oil price level for domestic oil producers was $5-$15 per barrel, which amounted to the cost of production.
Even before sanctions are lifted, Iran's oil exports were on target to hit a nine-month high in January, with 1.10 million barrels a day of crude, excluding condensate, to load.
Tehran is expected to target India, Asia's fastest-growing major oil market, as well as its old partners in Europe with increased exports once sanctions are lifted.