West Texas Intermediate crude oil prices slid sharply on the day, with July WTI down 4.35, or 5.12%, to a 2-month low. July gasoline futures also fell, dropping 0.0808, or 2.65%, to a 2-month low, as traders priced expectations for a potential easing of supply risks in the Middle East.
Key takeaways
- Price move: July WTI fell 5.12% to a 2-month low; July RBOB gasoline dropped 2.65% to a 2-month low.
- Catalyst: The U.S. and Iran agreed to end hostilities and reopen the Strait of Hormuz, with a peace process set to begin after Friday’s signing in Switzerland.
- Market implication: The prospect of increased throughput through the strait and a path toward higher output weighed on crude and refined-product demand expectations.
- Offsetting factors: Continued disruptions to Russian oil infrastructure and tight global inventories have provided support, but were not enough to counter today’s selloff.
What drove the selloff in crude and gasoline
Crude oil accelerated lower after news that the United States and Iran agreed to end the war and reopen the Strait of Hormuz. President Trump said the strait would reopen after Friday’s signing of a peace deal in Switzerland, which would kick off 60 days of talks on Iran’s nuclear program. He added that if no nuclear agreement is reached, the U.S. could restart military attacks.
Even with the possibility of renewed conflict, the market reaction suggests traders focused on the near-term reopening timeline and the potential for reduced shipping constraints. According to Kpler, nearly 600 vessels remained stuck in the Persian Gulf awaiting passage through the strait, while hundreds were waiting on the other side.
Supply expectations return: tankers, output and refinery activity
Vortexa said that if the U.S.-Iran deal is completed and insurers are willing to cover vessels, ballast tankers would increase. That would be followed by a restart of crude production, and then the restart of refineries—an expected sequence that can loosen global supply tightness over time.
At the same time, data pointing to higher U.S. production reinforced the bearish tone. The U.S. Department of Energy raised its estimate for 2026 crude production to 13.72 million barrels per day from 13.65 million bpd in a May forecast, according to the report cited in the article.
Why the decline wasn’t a straight line: Russia disruptions and inventory tightness
While today’s move leaned bearish, crude has support from ongoing disruptions tied to the conflict in Eastern Europe. Bloomberg reported on June 1 that Russia banned jet fuel exports following Ukraine’s attacks on Russian oil refineries, which it said hit a record in May. Bloomberg data also showed Russia’s refinery runs fell 13% year-over-year in May to 4.58 million bpd, the lowest since October 2009, reflecting the impact of sanctions on Russian oil companies, infrastructure, and tankers.
Further support has come from global stock levels. The International Energy Agency said in a monthly report released in May that inventories declined by about 4 million bpd in March and April, and that the market would remain “severely undersupplied” until October even if the conflict ends soon. Goldman Sachs estimated that crude output in the Persian Gulf was curtailed by about 14.5 million bpd, and that the disruption has drawn down nearly 500 million barrels from global stockpiles, potentially reaching 1 billion barrels by June.
Policy and OPEC supply signals add complexity
Potential supply increases from major producers have also weighed on the oil outlook. The article cited comments from OPEC delegates on May 14 indicating the cartel aims to continue lifting oil quotas over the coming months, with the return of halted production targeted by the end of September. It said OPEC has already agreed to restore about two-thirds of a 1.65 million bpd supply cut made in 2023 and intends to raise output targets further in staged monthly steps.
At the same time, near-term OPEC expansion may be limited by conflict dynamics. The article noted OPEC+ planned to boost output by 188,000 bpd in June after raising production by 206,000 bpd in May, but suggested any hike now appears less certain due to regional disruptions. It also pointed to a May crude production drop of 3.36 million bpd to a 40-year low of 16.33 million bpd.
Shipping data and U.S. supply trends underline the mixed picture
Shipping indicators showed continued strain, though not necessarily in a way that supported prices today. Vortexa reported that crude stored on tankers stationary for at least seven days declined 6.9% week-over-week to 76.50 million barrels in the week ended June 12.
On the U.S. side, the EIA report referenced in the article showed inventories as of June 5 were below seasonal averages: U.S. crude stocks were 5.3% under the seasonal 5-year average, gasoline inventories were 5.9% below, and distillate inventories were 13.9% below. U.S. crude production in the week ending June 5 rose 0.7% week-over-week to 13.799 million bpd, slightly below the record high of 13.862 million bpd set in the week of November 7.
Drilling activity also points to a gradual supply build. Baker Hughes reported that active U.S. oil rigs rose by 2 to 433 in the week ended June 12, an 11-month high. However, the article noted rigs remained well below the 5.5-year high of 627 recorded in December 2022.
What to watch next
With crude and gasoline trading at 2-month lows, investors will likely focus on whether the U.S.-Iran peace steps progress beyond Friday’s signing and on how quickly shipping insurance and tanker activity translate into operational restarts. Attention will also turn to upcoming U.S. inventory and production updates, alongside further policy signals from OPEC and any additional data on Russian export restrictions and refinery disruptions.
