During the pre-market trading session on Thursday, Occidental Petroleum Corp OXY fell 2.56%, Exxon Mobil Corp XOM declined 2.39%, while Chevron Corp CVX fell 1.50% as oil prices saw a considerable drop. This decline is attributed to the potential U.S.-Iran nuclear deal and a sudden increase in U.S. crude oil inventories, triggering concerns of oversupply.
What Happened: Oil prices plunged by more than $2, spurred by the prospects of a nuclear deal between the U.S. and Iran that could result in relaxed sanctions. At the same time, an unexpected rise in U.S. crude oil inventories last week has intensified oversupply worries. U.S. crude oil inventories rose by 3.5 million barrels to 441.8 million last week, contrary to analysts’ expectations of a 1.1 million-barrel decrease, according to the Energy Information Administration, reported Reuters.
Brent crude futures fell $2.48, or 3.75%, to $63.61 a barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped $2.66, or 4.18%, to $60.53 at 0920 GMT.
On Thursday, U.S. President Donald Trump announced that the U.S. was nearing a final agreement on a nuclear deal with Iran, stating that Tehran had “sort of” agreed to the terms. This came after an Iranian official told NBC News on Wednesday that Iran was prepared to make a deal with the U.S. if economic sanctions were lifted.
John Evans, analyst at PVM Oil, stated, “The crude build in the EIA Inventory Report has chased down the prices, and the move is accelerated by what appears to be a cooling of animosity in the US/Iran nuclear negotiations.”
At the same time, the International Energy Agency raised its average oil demand growth forecast for 2025 to 740,000 barrels per day—an increase of 20,000 bpd from its previous report—citing stronger economic growth projections and lower oil prices as factors driving increased consumption.
Why It Matters: Earlier this month, economist Peter Schiff stated that the decline in oil prices is less about a sudden market flood and more about a warning sign for a faltering global economy.
He argued that oil prices are dropping as global trade is stalling and recession fears are throttling demand. This context provides a broader perspective on the current oil price situation, suggesting that larger economic factors are at play.
Notably, the International Energy Agency (IEA) raised its average oil demand forecast for 2025 but expects global oil demand growth to slow to 650,000 barrels per day for the rest of the year, down from 990,000 bpd growth seen in the first quarter, due to economic challenges and record electric vehicle sales.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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