Oil prices fall to 4-month lows as progress in US-Iran talks cools supply concerns

OIL prices fell more than 1 per cent on Wednesday (Jul 1) to their lowest levels since March as optimism over US-Iran talks allayed supply concerns after US President Donald Trump said talks in Qatar had gone well.

Brent futures settled down US$1.38, or 1.89 per cent, to US$71.57 a barrel, while US West Texas Intermediate crude lost US$0.92, or 1.32 per cent, at US$68.58 a barrel. Both benchmarks closed at their lowest levels in four months.

“The negotiations that are currently taking place in Qatar are perceived as being positive (and) that has allowed prices to drift further,” Saxo Bank analyst Ole Hansen said. “There is a chance that we could see even lower prices.”

Trump said on Wednesday the US was getting along very well with Iran and that recent meetings in Qatar went well. The US and Iran held technical talks in Doha as they seek to agree on the flow of shipping through the Strait of Hormuz and secure a lasting ceasefire, a source with direct knowledge of the talks and an Iranian official said. The US and Iran have sparred publicly over the meaning of the interim pact, exchanging military strikes over the past week.

“There’s more optimism as more oil goes through the Strait of Hormuz,” said Phil Flynn, senior analyst for Price Futures Group. “The market is signalling that once we get past this, the gloves are going to come off and we’re going to probably produce more oil in the world than we ever have.”

Tanker traffic through the strait has started to recover, with US Vice-President JD Vance saying oil flows through the waterway had returned to pre-war levels, without citing figures.

Oil price forecasts cut

In the US, crude inventories fell by 3.8 million barrels to 408.4 million barrels in the week ended Jun 28, the lowest level since September 2018, as domestic refinery demand rose ahead of the Fourth of July holiday weekend, the US Energy Information Administration said on Wednesday. The draw, however, was smaller than analysts’ expectations in a Reuters poll for a drop of 4.5 million barrels.

Following five straight monthly increases, analysts have cut their 2026 oil price forecasts for the first time since the Iran war began, as the reopening of the Strait of Hormuz eased concerns over prolonged supply disruptions, a Reuters poll showed.

Brent fell by around US$45 a barrel in the second quarter of 2026, its largest quarterly drop since the global financial crisis in 2008. US crude futures, meanwhile, fell by around US$31 a barrel, their largest quarterly decline since 2020, when the Covid-19 pandemic crushed global oil demand.

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The declines followed progress towards ending the Middle East conflict, after sharp gains in March triggered by the US-Israeli attack on Iran.

Meanwhile, Opec+ oil-producing countries will likely agree on a further hike in their output targets from August when they meet on Jul 5, three sources said on Wednesday. REUTERS