Oil prices declined on Wednesday, with Brent crude falling 1.9% to settle at $71.57 per barrel and WTI dropping 1.3% to $68.58 per barrel, as optimism surrounding U.S.-Iran negotiations continued to ease concerns over global supply disruptions.
Markets reacted positively after President Trump said recent talks in Qatar had gone well, reinforcing expectations that both sides are making progress toward a longer-term agreement governing shipping through the Strait of Hormuz and extending the current ceasefire. Improving tanker traffic through the waterway has further reduced the geopolitical risk premium that had driven prices sharply higher earlier this year, with officials indicating that oil flows have largely returned to pre-conflict levels.
Additional pressure came from expectations of increased future supply. OPEC+ is widely expected to approve another production increase at its upcoming meeting, while analysts have begun lowering their 2026 oil price forecasts as the reopening of the Strait of Hormuz reduces the likelihood of prolonged supply disruptions. Combined with recovering Middle Eastern exports, these developments have strengthened expectations that global oil markets could move into surplus over the next year.
Supporting prices somewhat, U.S. crude inventories declined by 3.8 million barrels last week to 408.4 million barrels, their lowest level since September 2018, as refinery activity increased ahead of the July 4 holiday. However, the draw was slightly smaller than market expectations and was not enough to offset the broader bearish sentiment driven by improving supply prospects.