US crude and gasoline futures slid on Monday after Iran signaled meaningful momentum in peace discussions with the United States, a development that reduced near-term disruption risk for Middle East oil flows. July WTI crude settled down 1.78, or 2.32%, while July RBOB gasoline closed lower by 0.0079, or 0.26%, giving back part of earlier gains driven by escalating Middle East tensions overnight.
Key takeaways
- WTI and gasoline fell: July WTI closed down 2.32% and July RBOB gasoline fell 0.26% after earlier strength.
- Catalyst: Iran and the US pointed to “major progress” in talks, alongside steps that could reopen the Strait of Hormuz and ease supply concerns.
- Oil-supply outlook improved: A US-authorized temporary 60-day license for Iranian exports and a likely resumption of vessel traffic increased expectations of greater crude availability.
- Offsetting risks remain: Continued disruptions to Russian energy infrastructure and tighter global inventories keep a floor under prices, even as Middle East risk premium eased.
What drove the move
Crude futures moved lower after Iran said it had made “major progress” in overnight discussions with the US regarding a peace deal, following an interim arrangement last week that extended a 60-day ceasefire and enabled the reopening of the Strait of Hormuz. According to a joint statement from Pakistan and Qatar, there was “encouraging progress” in the talks, with the US and Iran agreeing to set up a high-level committee to oversee negotiations, including working groups focused on nuclear issues and sanctions.
The easing of geopolitical tail risk mattered to traders because it directly affects expected Middle East supply. The Strait of Hormuz reopening raises the prospect of more oil shipments moving from Persian Gulf areas not limited to Iranian barrels. The report said that resumption of vessel traffic could lead to the release of more than 100 laden ships carrying oil that were reportedly stuck in the gulf, effectively returning additional supply to the market.
In addition, the US authorized a temporary 60-day license that allows Iran to sell crude oil and petroleum products through August 21, according to the report. That decision further reduced the probability of prolonged supply disruption, contributing to the selloff after crude initially rallied on threats from Iran.
Market reaction and the trade-off for investors
Monday’s pullback reflects a balancing act between geopolitical de-escalation in the Middle East and ongoing physical disruptions elsewhere in the energy system.
While the Middle East risk premium eased, the broader supply picture still includes factors that can support crude. The International Energy Agency warned in a recent report that the impact of the Iran conflict on global oil demand may be deeper than previously estimated, saying world oil consumption could decline by 1.1 million barrels per day this year versus an earlier estimate of 420,000 bpd. Separately, Goldman Sachs cut its Brent crude forecast to $80 a barrel for Q4, down from $90, and said it expects Persian Gulf crude exports to return to pre-war levels by the end of July—one month earlier than previously expected.
At the same time, the US production outlook also weighs on the market. The US Department of Energy raised its US 2026 crude production estimate to 13.72 million barrels per day from a May estimate of 13.65 million bpd, which the report said is negative for oil prices.
Supply-tightness signals that still matter
Even with Monday’s geopolitical easing, the report pointed to continued tightness indicators and disruption risk in other producing regions.
Crude prices have support from ongoing Ukrainian drone attacks on Russian oil infrastructure, according to EA Analytics and Bloomberg as cited in the report. EA Analytics said Russian crude-processing rates averaged 4.32 million bpd in the first 10 days of June—the lowest in 20 years—amid damage to Russian energy infrastructure. Bloomberg reported that Ukrainian forces struck three Russian fuel-producing facilities this month, after a record 17 attacks in May.
The report also noted that global inventories have been declining. According to the IEA’s monthly report released in May, global oil inventories fell by about 4 million bpd in March and April and the market would remain “severely undersupplied” until October, even if the conflict ends soon.
Data from the Energy Information Administration and industry updates in the report reinforced that inventories have been running below seasonal norms. The EIA’s latest figures cited in the piece showed US crude, gasoline, and distillate inventories all below their seasonal five-year averages as of June 12. Vortexa also reported that crude stored on tankers stationary for at least seven days fell 4.1% week over week to 90.86 million barrels in the week ended June 19.
Bigger picture: OPEC output plans and US supply momentum
Policy and production expectations remain central to the outlook. The report cited comments from OPEC delegates in May saying the cartel intends to continue oil quota increases over the next few months, completing the return of halted production by the end of September. It also referenced OPEC+ plans to boost output earlier, though it noted that any ramp-up may be constrained by war-related production issues in parts of the Middle East.
On the US supply side, Baker Hughes data cited in the report showed the number of active US oil rigs stayed unchanged in the week ended June 19 at 433, an 11-month high. Still, the report emphasized that rig counts are well below longer-run peaks—signaling potential for renewed supply growth, but with a limited near-term acceleration compared with prior cycles.
Looking ahead, traders will likely watch the pace of US-Iran negotiations and any follow-through on sanctions licensing and shipping through the Strait of Hormuz. Investors will also focus on upcoming inventory and production updates, alongside signals from OPEC regarding quota increases and further guidance from the US on supply trends.
