Oil Holds Decline on Supply Optimism

Crude oil fell toward $75 per barrel on Wednesday, sliding for the fifth straight session and reaching its lowest level since early March, as expectations of increased supply continued to weigh on prices ahead of the signing of a peace agreement between the US and Iran. The two countries are scheduled to sign an interim deal in Switzerland on Friday, offering Tehran broad economic incentives, including the immediate resumption of its oil exports. Tankers from other nations are also expected to resume passage through the Strait of Hormuz once the agreement takes effect, although shipping companies remain cautious about its long-term durability. Additional supplies from the region are expected to replenish refinery inventories globally, alongside higher OPEC+ export quotas and increased output from the UAE, which left the cartel during the conflict. Meanwhile, industry data showed that US crude inventories declined by 8.3 million barrels last week.

Crude oil traded at three-month lows below $76 per barrel on Wednesday after falling for four straight sessions, pressured by expectations of increased supply following the anticipated peace agreement between the US and Iran. The two nations are set to sign an interim deal in Switzerland on Friday, granting Tehran broad economic incentives, including the immediate resumption of its oil exports. Tankers from other countries are also expected to resume transit through the Strait of Hormuz once the agreement takes effect, although shipping firms remain cautious about its long-term stability. Additional supplies from the region are expected to boost refinery inventories worldwide, alongside higher OPEC+ export quotas and increased production from the UAE, which exited the cartel during the conflict. Meanwhile, industry data indicated that US crude inventories fell by 8.3 million barrels last week.

Crude oil prices fell over 6% to $75.5 per barrel on Tuesday, the lowest since the first week of March, erasing the bulk of the surge from the conflict in the Middle East amid expectations that exports from GCC countries will be restored imminently. The US and Iran continued to signal they will sign a memorandum of understanding this Friday. The deal reportedly has both countries allowing tankers to cross the Strait of Hormuz upon the agreement, with the US unopposed of Tehran deploying tankers immediately. The fresh supply from the region is due to replenish refineries across the globe with the higher export quotas from OPEC+ and higher output from the UAE, which left the cartel during the conflict. The US Strategic Petroleum Reserves had fallen to a 43-year low. In turn, Iranian output will likely refill Chinese oil stockpiles, which were depleted in the last months as the world's largest importer refrained from purchasing oil to prop up prices further.