Oil prices have fallen below $28 a barrel amid fears the lifting of international sanctions on Iran could worsen the existing oversupply problem.

Brent crude, used as an international benchmark, fell as low as $27.67 a barrel, its lowest since 2003, before recovering slightly to trade at $28.17.

The price of US crude fell below $29 a barrel to $28.86.

The lifting of the Iran sanctions mean half a million barrels more oil per day could be produced, say analysts.

The decision to lift the sanctions against Iran came on January 17 after the international nuclear watchdog, the IAEA, said Iran had complied with a deal designed to prevent it developing nuclear weapons.

Iran has the fourth largest proven oil reserves in the world, according to the US Energy Information Agency and any additional oil would add to the one million barrels a day of over-supply that has led to a more than 70% collapse in oil prices since the middle of 2014.

Analysts said Iran already had quite a lot of oil ready to sell.

The drop in the price of oil has been driven by oversupply, mainly due to US shale oil flooding the market.

At the same time, demand has fallen because of a slowdown in economic growth in China and Europe.

Historically, OPEC has cut production to support prices. But led by Saudi Arabia, by far the group’s most powerful member, the group has resolutely refused to trim supply this time.

Analysts expect supply to continue to outstrip demand over the next two years, which would keep prices low.