Oil prices dropped sharply Thursday after U.S. President Donald Trump said Washington is nearing a nuclear agreement with Iran, raising the possibility of renewed Iranian crude exports and easing geopolitical tensions that have long propped up global prices. The sell-off was further fueled by a surprise build in U.S. crude inventories, compounding fears of oversupply.
Brent crude futures for July fell 3.2% to $63.99 a barrel, while U.S. West Texas Intermediate dropped 3.4% to $60.98. Earlier in the day, Brent had reached as low as $63.80.
Speaking in Doha, Qatar during a trip to the Middle East, Trump told reporters, "We're in very serious negotiations with Iran for long-term peace." He added that Tehran had "sort of" agreed to the terms of a potential agreement.
The comments followed remarks from a senior Iranian official, who told NBC News that Iran was open to signing a deal under certain conditions in exchange for lifting U.S.-imposed economic sanctions. The prospect of resumed oil exports from Iran-potentially up to 1 million barrels per day-sent immediate ripples through energy markets.
Tamas Varga, an analyst at PVM Oil, said in a note to clients, "The overnight development of a possible nuclear deal is the sole reason for the morning's weakness. If an agreement is reached...Iran's crude oil exports can rise by as much as 1 [million barrels per day]."
At the same time, the U.S. Energy Information Administration reported an unexpected 3.5 million-barrel increase in domestic crude stockpiles last week, bringing the total to 441.8 million barrels. Analysts had forecast a draw of 1.1 million barrels, intensifying concerns about near-term demand.
John Evans, analyst at PVM, said the price drop was "accelerated by what appears to be a cooling of animosity in the US/Iran nuclear negotiations."
Oil markets are also watching supply decisions by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+. The group, led by Saudi Arabia, agreed earlier this month to increase output by 411,000 barrels per day in June, continuing its trend of raising production despite uncertain demand growth.
On the demand side, the International Energy Agency raised its oil demand growth forecast for 2025 by 20,000 barrels per day to 740,000, citing improved economic conditions and lower oil prices as supporting factors.
Tensions between the U.S. and Iran remain fluid. On Wednesday, the Treasury Department imposed new sanctions targeting Iran's missile production network, following measures Tuesday against 20 companies linked to illegal oil shipments to China. Despite the sanctions, negotiations have continued, including a fourth round of U.S.-Iran talks in Oman earlier this week.
Iran's economy, battered by sanctions since the U.S. exited the 2015 Joint Comprehensive Plan of Action in 2018, has seen increased pressure amid domestic unrest and diminished influence across the region. The collapse of the Assad regime in Syria and setbacks for Hezbollah have further strained Tehran's geopolitical position.
