Crude oil prices experienced a significant decline of 5.82%, settling at Rs 7,175, as market participants responded to the enhanced outlook for the restoration of oil supplies via the Strait of Hormuz, alongside ongoing uncertainty regarding the preliminary agreement intended to resolve the U.S.-Iran conflict. Investor sentiment deteriorated following U.S. President Donald Trump’s announcement of an interim deal aimed at concluding the conflict. Concurrently, reports surfaced indicating that Iran and the United States would reengage in negotiations in Switzerland to pursue a comprehensive agreement. The potential for normalised oil flows from the Gulf region has notably diminished the geopolitical risk premiums that had previously bolstered crude prices.

Major financial institutions have adjusted their oil outlooks downward in the wake of the agreement. Goldman Sachs has revised its fourth-quarter Brent crude forecast downward to $80 per barrel, a decrease from the previous estimate of $90, and has also adjusted its 2027 average forecast to $75. In a similar vein, Morgan Stanley has revised its fourth-quarter Brent forecast downward by $15 to $80 per barrel, attributing this adjustment to anticipated gradual improvements in Gulf oil production and tanker movements. Both institutions foresee a more rapid normalisation of exports than previously anticipated, coinciding with a reduction in regional tensions. Despite the decline in prices, U.S. inventory data offered some fundamental support.

According to the Energy Information Administration, U.S. crude oil inventories decreased by 7.2 million barrels, a figure that notably surpassed market expectations of a 4 million-barrel draw. Crude stocks at Cushing experienced a decline, while refinery utilisation increased to 95.3%. However, petrol inventories experienced a slight uptick, indicative of varying demand conditions. Distillate inventories experienced a slight reduction during the reporting period. In May, OPEC’s production reached its lowest point in over twenty years, largely attributed to interruptions in Iranian exports and diminished shipments from Gulf producers.

Technically, the market is experiencing renewed selling pressure, as evidenced by a 27.57% increase in open interest alongside a decline in prices. Crude oil exhibits immediate support at Rs 6,989, with subsequent support at Rs 6,803. Resistance is identified at Rs 7,505, and a breach of this level may catalyse additional upward momentum towards Rs 7,835.