Oil prices fell by almost 3% during Asian trading on Thursday as investors examined the potential impact of the interim peace agreement between the United States and Iran.
Expectations of stronger global supply and a possible oil surplus placed additional pressure on crude prices.
Brent and WTI Oil Prices Decline
Brent crude futures for August delivery fell 2.13% to $77.70 per barrel by 01:22 ET, or 05:22 GMT.
West Texas Intermediate crude futures declined 2.8% to $74.66 per barrel.
Both contracts returned to their lowest levels since March 2. Oil prices had gained approximately 1% during the previous session.
Oil Extends Weekly Losses
Crude prices have now fallen in five of the past six trading sessions.
Including Thursday’s losses, oil has declined by nearly 11% since the beginning of the week.
Prices briefly recovered after President Donald Trump said the agreement with Tehran was not yet final. He also warned that military action could resume if Iran failed to satisfy U.S. demands.
US and Iran Agree to 60-Day Framework
Investors are reviewing the details of the interim agreement, which was signed digitally by Trump and Iranian President Masoud Pezeshkian.
The 60-day framework calls for an end to hostilities and the reopening of the Strait of Hormuz.
It also proposes a gradual reduction in U.S. restrictions on Iranian oil exports.
However, Trump maintained a firm position toward Tehran. He warned that Washington could restore pressure if Iran breached the agreement.
Iranian Oil Supply Could Return to Market
The possibility of more Iranian oil returning to international markets has increased expectations of stronger global supply.
Oil production and transportation across the Gulf region had faced weeks of disruption because of the conflict.
A reopening of the Strait of Hormuz and an easing of export restrictions could allow additional Iranian barrels to reach global buyers.
This prospect has weakened market sentiment and contributed to the latest decline in crude prices.
IEA Warns of Significant Oil Surplus
The International Energy Agency added to concerns about oversupply by warning that the global oil market could move into a substantial surplus.
The agency expects Middle Eastern production to recover as regional tensions ease.
It forecast global oil supply growth of approximately 8 million barrels per day between 2026 and 2027.
By comparison, global demand is expected to increase by only around 2 million barrels per day.
That imbalance could create an oil surplus of more than 5 million barrels per day by 2027.
US Crude Inventories Fall Sharply
U.S. inventory data offered some support to oil prices.
The Energy Information Administration reported that commercial crude stockpiles fell by 8.3 million barrels during the week ending June 12.
Inventories declined to 418.2 million barrels, compared with analyst expectations for a smaller drop of 3.6 million barrels.
The larger-than-expected draw suggested that current demand remained relatively firm despite concerns about future oversupply.
Gasoline Stocks Decline as Distillates Rise
U.S. gasoline inventories decreased by 900,000 barrels to 214.2 million barrels.
Meanwhile, distillate stockpiles unexpectedly increased by approximately 1 million barrels to 103.1 million barrels.
The mixed inventory figures provided limited relief as traders remained focused on the broader global supply outlook.
Federal Reserve Outlook Adds Market Pressure
Investors were also assessing the Federal Reserve’s latest monetary policy decision.
The central bank kept interest rates unchanged on Wednesday, as widely expected.
However, Fed officials indicated that an interest rate increase could still take place later this year.
Higher interest rates can weaken economic activity and reduce demand for energy. This outlook added another source of pressure for oil prices as markets evaluated the possibility of a major supply surplus.
