Crude oil prices extended their decline on Wednesday, with West Texas Intermediate (WTI) crude trading below $76 per barrel and Brent crude slipping under $79 per barrel. Both benchmarks hovered near their lowest levels since early March as investors increasingly priced in the possibility of a US-Iran agreement that could quickly return significant oil supplies to global markets.
The anticipated interim agreement, expected to be signed in Switzerland on Friday, has fueled expectations that Iranian oil exports could resume almost immediately, reducing concerns about supply disruptions that had driven prices sharply higher earlier this year.
The proposed deal would reportedly allow the United States to lift restrictions on Iran's ports while Tehran would permit tanker traffic to move freely through the Strait of Hormuz.
Before tensions escalated, nearly 20% of global crude oil and liquefied natural gas shipments passed through the strategic waterway. The reopening of shipping routes could release more than 100 oil-laden vessels currently stranded in the Gulf, significantly boosting available supply.
President Donald Trump said the agreement would prevent Iran from developing a nuclear weapon, while US officials indicated the deal would allow Iran to resume oil sales once signed.
The framework would also extend the fragile ceasefire reached in April by another 60 days, providing additional time for negotiations toward a permanent settlement.
Analysts say markets are rapidly removing the geopolitical risk premium that had been embedded in oil prices during the conflict.
Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that traders are increasingly pricing in a return to normal conditions. However, she cautioned that tanker traffic through the Strait of Hormuz has not yet fully recovered, meaning the normalization process could take time.
Similarly, Hiroyuki Kikukawa of Nissan Securities Investment said oil prices have retreated as traders anticipate the reopening of the Strait, though uncertainty surrounding the final details of the agreement continues to limit aggressive selling.
Despite diplomatic progress, tensions remain elevated across the region. Iran's military has threatened a harsh response if Israeli operations against Hezbollah continue in Lebanon. At the G7 summit in France, Trump criticized Israel's military campaign, saying the conflict had lasted too long and caused excessive casualties.
Supply expectations are not the only factor weighing on crude prices.
The International Energy Agency recently warned that the conflict could create a larger-than-expected hit to global oil demand and contribute to a renewed supply surplus.
China, the world's largest crude importer, provided another bearish signal. Data showed the country's crude oil throughput fell 9.1% in May from a year earlier, reaching its lowest level in nearly four years. The decline suggests refiners may be drawing down inventories instead of increasing purchases.
As a result, oil prices have fallen nearly 40% from the peaks reached during the height of the conflict.
While broader market sentiment remains bearish, declining US inventories have helped limit losses.
According to figures from the American Petroleum Institute, US crude oil stockpiles fell by 8.9 million barrels during the week ending June 12, to 340.3 million barrels, its lowest level since 1983.
Source: X
The larger-than-expected reduction points to continued strength in near-term demand and tighter domestic supplies, even as global supply prospects improve.
Looking ahead, traders will closely monitor Friday's expected US-Iran agreement, developments at the G7 summit, and upcoming official inventory data. While the prospect of additional Iranian supply continues to pressure prices, ongoing geopolitical uncertainty and falling US stockpiles could keep volatility elevated in both Brent and WTI markets.
