Oil steadies near three-month lows as markets assess peace deal and growing supply surplus outlook

Oil prices held near their lowest levels in three months on Wednesday as investors weighed the impact of the US-Iran peace agreement against warnings from the International Energy Agency of a significant supply surplus next year, while signs of near-term demand improvement emerged from efforts to rebuild depleted inventories.

Brent crude futures rose 30 cents, or 0.4%, to $79.26 per barrel, while US West Texas Intermediate crude gained 24 cents, or 0.3%, to $76.29 per barrel.

Both benchmarks had earlier touched their lowest levels since early March after falling about 5% on Tuesday amid hopes that the US-Iran agreement would help restore oil flows from the Gulf region.

Tamas Varga, an analyst at PVM Oil Associates, said the market’s base-case scenario now assumes the reopening of the Strait of Hormuz and the resumption of shipping traffic through the strategic waterway in both directions.

He added that even a gradual recovery in oil flows would have a meaningful impact on the global oil market balance.

IEA forecasts a major oil surplus in 2027

In its first long-term outlook for 2027, the International Energy Agency said the global oil market is heading toward a substantial supply surplus, with worldwide production expected to increase by about 8 million barrels per day, while demand is projected to rise by only around 2 million barrels per day.

In the near term, the agency noted that the US-Iran agreement could provide an opportunity for countries and companies to replenish depleted inventories or build new strategic reserves.

Crispus Nyaga, research analyst at Empire FX, said markets may not yet be fully pricing in the scale of the expected supply surplus that could enter the market over the coming period.

More details of the temporary agreement emerged on Tuesday after a US official confirmed that Iran would be allowed to resume oil exports immediately upon signing the deal.

The memorandum of understanding, which has not yet been officially published, extends the fragile ceasefire reached in April by an additional 60 days to allow negotiations aimed at securing a permanent settlement.

Despite that, energy industry officials continue to warn that a full return to pre-war production and refining levels could take weeks, months, or even years.

Uncertainty also increased after Israel distanced itself from both the April ceasefire agreement and the latest US-Iran deal, raising questions about the long-term durability of the arrangement.

Against this backdrop, Goldman Sachs lowered its forecast for Brent crude in the fourth quarter of 2026 to $80 per barrel from a previous estimate of $90, citing reduced upside risks to energy prices following the agreement.

Meanwhile, data from the American Petroleum Institute showed US crude oil inventories fell by 8.3 million barrels in the week ended June 12.

The drawdown was significantly larger than analysts’ expectations for a decline of 4.6 million barrels, while markets await official inventory figures from the US Energy Information Administration later today.