Summary: Oil edged lower late in the trading session as an improving physical supply picture and evidence of near-term oversupply limited upside. Traders are also recalibrating the geopolitical risk premium linked to Iran, even as negotiations between Washington and Tehran continue to draw attention. Market structure, flows through the Strait of Hormuz and buying by Chinese independent refiners factored into investor positioning.
At 21:19 ET (01:19 GMT), U.S. Crude Oil WTI futures were down 0.32% at $68.47 a barrel. Brent futures had not yet commenced trading at that time.
Market participants pointed to several drivers behind the modest pullback in prices. The unwinding of a geopolitical risk premium that had built amid the Iran-related tensions has been supported by reports of improving crude flows from the Gulf. That improvement, together with futures market signals, reinforced expectations that supplies will be ample in the near term.
Macro influences also played a role. A softer-than-expected U.S. jobs report reduced the immediacy of expectations for a near-term Federal Reserve rate increase, while the U.S. dollar index held broadly steady. Those dynamics helped limit commodity losses but did not spur a sustained rally in crude.
Diplomacy and the Strait of Hormuz
Negotiations between Washington and Tehran remained under close observation. U.S. President Donald Trump told CNBC he believed Iran had "agreed to just about everything we need," signaling confidence that talks were progressing. At the same time, the Wall Street Journal reported Tehran has resisted a U.S. proposal that would have Iran renounce claims over the Strait of Hormuz in return for the release of billions of dollars in frozen funds. According to that report, the U.S. offered sanctions-related incentives aimed at securing unrestricted passage through the strategic waterway, but Iran has so far declined the proposal.
The combination of those mixed diplomatic signals has kept geopolitical risk on traders' radars even as immediate fears of a disruption to Gulf crude supplies have diminished.
Supply dynamics and futures structure
ANZ flagged the recent accumulation of short positions as a central factor driving weakness in crude futures, although it noted some investors trimmed bearish exposure ahead of the U.S. holiday weekend. The bank highlighted that Brent's futures curve remains in contango - with prompt prices trading below longer-dated contracts - a structural sign that the market expects near-term oversupply.
Recovering flows through the Strait of Hormuz have reinforced the contango signal. ANZ also pointed to a rebound in Saudi Arabia's exports, which have returned to around 90% of their pre-February levels, supporting the view of stronger supply availability.
Lower crude prices have in turn prompted buying from China's independent refiners, a trend aided by more flexible pricing from Saudi Arabia and Kuwait. Despite that demand response, ANZ cited data from Vortexa showing Iran continues to face marketing challenges: more than 58 million barrels remain in floating storage and over 90% of that volume has yet to secure a destination.
Overall, the market is balancing reduced near-term disruption risk against structural indicators of oversupply and evolving investor positioning as the U.S. holiday approaches.