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.

US crude futures were more than 4% lower at $29.75 per barrel, after posting the first significant gains for 2016 in the previous session. The contract hit a 12-year low of $29.61 in earlier trading.

The March Brent contract was down 95 cents at $29.93 a barrel. Earlier on Friday, it fell to $29.73, the lowest since February 2004.

The February contract, which expired on Thursday, closed higher for the first time this year at $31.03 per barrel.

While experts warned that not all sanctions on Iran 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, Reuters reported.

"With sanctions on Iran likely to be lifted, more oil is flooding the markets," Commerzbank analysts wrote on Friday. "Although the additional supply had been imminent for some time, current sentiment ought to send prices further south," according to the news wire.

Commerzbank cut its 2016 forecast for oil prices, changing its year-end expectation for Brent to $50 per barrel, down from a previous forecast of $63.

Iran's oil exports were already on target to hit a nine-month high in January, with 1.10 million barrels a day of crude, excluding condensate, to load.

Reuters said Tehran is expected to target India, Asia's fastest-growing major oil market, as well as its old partners in Europe with the increased exports.

"It is the wrong time for Iran to be returning to the oil market, both for the market and likely also for Iran," Phillip Futures said in a note on Friday.