Global oil prices declined by more than 3% on Thursday as traders reacted to reports suggesting progress in nuclear negotiations between the United States and Iran.
The potential easing of U.S. sanctions on Iranian crude exports, combined with an unexpected rise in U.S. oil inventories, has raised concerns of a looming oversupply.
Brent crude futures fell by $2.16, or 3.3%, to $63.93 per barrel by mid-morning trading in Asia. U.S. West Texas Intermediate (WTI) dropped by $2.10, also 3.3%, to stand at $61.05 per barrel. The losses extend declines from the previous session, during which both benchmarks shed approximately 0.8%.
The downturn followed an NBC News interview published on Wednesday in which an unnamed Iranian official said Tehran would be prepared to limit its enrichment of uranium in return for sanctions relief. The comment comes amid a fourth round of indirect talks between Washington and Tehran in Oman, reportedly aimed at defusing long-standing disputes over Iran’s nuclear programme.
Yuki Takashima, an economist at Nomura Securities, said market sentiment had been affected by “fresh selling triggered by expectations that a U.S.–Iran nuclear deal would ease recently tightened U.S. sanctions on Iran, potentially loosening the global crude supply-demand balance.”
The Kingdom of Saudi Arabia has publicly backed the ongoing diplomatic efforts. Speaking on Wednesday, Saudi Foreign Minister Prince Faisal bin Farhan Al-Saud expressed full support for the negotiations, voicing hopes for a constructive outcome.
Nevertheless, the diplomatic thaw has not halted further punitive measures from Washington. The U.S. Treasury Department on Wednesday imposed new sanctions targeting Iran’s domestic production of ballistic missile components. This followed measures taken on Tuesday against a network of approximately 20 companies allegedly involved in shipping Iranian oil to China, part of what U.S. officials describe as a longstanding sanctions evasion scheme.
In parallel with the geopolitical developments, market fundamentals have also weighed heavily on prices. Weekly data released by the U.S. Energy Information Administration (EIA) showed a surprise increase in domestic crude inventories. U.S. stockpiles rose by 3.5 million barrels to 441.8 million barrels in the week ending 9 May, contradicting analysts’ expectations for a drawdown of 1.1 million barrels.
Industry data from the American Petroleum Institute (API), released on Tuesday, similarly indicated a substantial build in crude stocks, estimated at 4.3 million barrels.
According to Tony Sycamore, market analyst at IG, the rise in inventories is contributing to bearish sentiment, alongside profit-taking activity following a recent rebound in prices. “My forecast is we continue to see a range-bound market for the next month or so. However, barring an unexpected geopolitical shock, when the range does give way it will be to the downside, towards $50 per barrel,” he said.
Current trading patterns suggest that crude remains within a defined corridor, roughly between $55 and $65 per barrel, although this balance now appears increasingly fragile.
Meanwhile, the Organisation of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, have continued gradual increases in output. However, the group released an updated forecast on Wednesday indicating slightly reduced expectations for oil supply growth from producers outside the alliance, including the United States.
OPEC’s revised outlook, while modest in scope, highlights a growing uncertainty over non-OPEC supply resilience amid fluctuating prices and broader macroeconomic headwinds.
Market participants are now watching developments in the U.S.–Iran negotiations closely, as any tangible agreement could reintroduce significant volumes of Iranian crude to international markets. Iran, which holds the world’s fourth-largest proven reserves of crude oil, has faced strict export restrictions since the U.S. unilaterally withdrew from the Joint Comprehensive Plan of Action (JCPOA) in 2018.
Although the timeline for a formal agreement remains unclear, even incremental signs of a diplomatic breakthrough appear sufficient to unsettle oil traders already concerned about a weakening demand outlook and growing stockpiles.
Brent and WTI futures remain under pressure, with downward momentum likely to persist in the near term unless fundamental shifts—such as output cuts or a deterioration in Middle East security—intervene to tighten supply. Until then, market consensus appears to favour a cautious, if not bearish, trajectory.
