Oil prices have steadied following their most substantial quarterly decline since the pandemic, with Brent trading above $73 a barrel and West Texas Intermediate near $70. This stabilization comes as traders monitor ongoing peace talks between the US and Iran and the resumption of shipping through the critical Strait of Hormuz. US negotiators Jared Kushner and Steve Witkoff have held positive discussions in Qatar, and technical talks with Iran are progressing, according to a senior administration official.
Analysts are projecting an oversupply in the market for the coming year. Goldman Sachs forecasts a surplus of nearly two million barrels a day next year, even after accounting for the restocking of global strategic petroleum reserves post-Iran war. Morgan Stanley has also cautioned about a looming glut due to faster-than-expected recovery of flows through the strait, prompting them to reduce price forecasts for the second time in two weeks. Samantha Dart, co-head of global commodities research at Goldman Sachs, anticipates a normalization of flows by the end of July, leading to an oversupplied market.
Despite the positive developments, Iran reiterated its intent to control maritime traffic through the Strait of Hormuz. Key sticking points, including Iran's nuclear program and the conflict in Lebanon, remain unresolved, complicating discussions during the 60-day ceasefire window. Traders are also awaiting US crude inventory data, following last week's Energy Information Administration report showing nationwide stockpiles at their lowest since 1984. Russia's surging shipments and Iran's exports of over 40 million barrels since the lifting of the US naval blockade are contributing to a buildup of barrels at sea.
While recent attacks around Hormuz have marred negotiations, oil tanker traffic is now showing signs of recovery and has picked up since the US and Iran exchanged strikes over the weekend. Samantha Dart noted that markets have not reacted significantly to these "flare-ups" because US energy exports and China imports have remained consistent, indicating that the oil market is moving in the right direction. Crude prices had fallen in recent days as the parties continued efforts to reach a more lasting agreement.
