Brent crude oil fell 2.1 per cent to $56.65 a barrel in early trading as diplomats at talks in Vienna said they had agreed a historic deal with Iran on limiting its nuclear programme.
Meanwhile, West Texas Intermediate, the US benchmark, dropped 2.3 per cent to $51.
Under the deal, world powers including the US, the UK, France, China, Germany and Russia will lift trading sanctions placed on the country.
The EU has confirmed negotiators will have a "final plenary" meeting this morning, followed by a press conference.
Although there are no details on the deal yet, the AP has reported that they include a compromise on site inspections under would UN inspectors can "monitor" military sites, although Iran can challenge any access requests.
Meanwhile, Reuters said that under the deal, sanctions could be restored in 65 days if Iran violates the sanctions. And it added that the UN arms embargo and missile sanctions are likely to remain in place for five years and eight years respectively.
However, after negotiations continued past a deadline set by the US, Congress will have 60 days, rather than the 30 days originally hoped for, to scrutinise the deal. The White House has said it is confident it can pass the measures, despite the longer waiting time.
Yesterday oil prices dipped below $60 a barrel as talks continued. Although prices were pushed lower by a release by the Organisation of Petroleum Exporting Countries (Opec), which showed Saudi Arabia's production increased by 231,000 barrels per day in June, there were also warnings they could fall further if a deal was reached.