Crude oil extended losses to multi-month lows on Wednesday amid hopes that progress in US-Iran diplomatic talks and a 60-day waiver of sanctions on Iranian oil would improve supply conditions on the market.
Shipping activity through Hormuz continues to recover, Gulf producers are moving to restore output, and the sanctions waiver opens the door to Iranian barrels returning to international markets. The cumulative effect is a market repricing toward a supply-recovery scenario.
Stockpile data will be the next key read. The Hormuz closure placed global inventories under strain, and while the pace of draws might slow down as supplies return, markets will be watching whether the recovery in flows translates into a meaningful rebuilding of buffers.
At the same time, weaker demand could weigh on the market as well. The IEA has revised its 2026 demand estimates lower, while supply from the Gulf normalizes, leaving the market with a potential oversupply and downside risks.
The principal upside risk remains the nuclear issue. Any breakdown in talks would rapidly reverse the current directional move. Persistent progress in the diplomatic talks could continue to drive crude lower.
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