Oil slips below $72 as U.S.-Iran talks advance

(Bloomberg) — Oil prices declined Tuesday as positive signals from indirect U.S.-Iran talks eased concerns over disruptions to global crude supplies, while analysts warned that recovering exports through the Strait of Hormuz could accelerate an emerging supply surplus.

Brent crude fell below $72/bbl after posting its steepest quarterly decline since the pandemic, while West Texas Intermediate traded near $68/bbl.

U.S. negotiators Jared Kushner and Steve Witkoff held what a senior administration official described as positive indirect talks with Iran in Doha, Qatar, aimed at easing tensions over the Strait of Hormuz. President Donald Trump also characterized the discussions as productive.

The diplomatic progress comes as oil tanker traffic through the strategic waterway continues to recover following recent U.S.-Iran hostilities, although vessel movements remain below pre-conflict levels.

At the same time, the physical crude market is showing signs of weakening, reflecting expectations of ample supply. Crude cargoes from regions including West Africa and the North Sea have been offered at multiyear low premiums, while Saudi Arabia has resumed rare spot crude sales as exports increase.

Analysts increasingly expect the market to shift from geopolitical supply concerns to oversupply as Middle East exports normalize.

"We expect that by the end of July this is done," Samantha Dart, co-head of global commodities research at Goldman Sachs, said of the conflict. "Once we have a normalization of flows through the strait, the expectation is that we go into an oversupply."

Goldman Sachs forecasts a global crude surplus approaching 2 MMbpd next year, even after accounting for strategic petroleum reserve replenishment following the Iran conflict. Morgan Stanley has also lowered its oil price outlook, citing a faster-than-expected recovery in Strait of Hormuz exports.

Iran said it has exported more than 40 million barrels of crude since the U.S. lifted its naval blockade, while Russian shipments have also climbed to record levels, adding to global supply.

Despite the improving diplomatic outlook, Tehran has reiterated its intention to maintain control over maritime traffic through the Strait of Hormuz, underscoring that negotiations remain fragile and key issues—including Iran's nuclear program and regional security—have yet to be resolved.