Oil prices fell on Thursday amid reports of a potential U.S.-Iran peace deal and an IEA forecast predicting a supply glut next year. Brent crude dropped 1.13% to $78.65, and WTI futures fell 1.26% to $75.82.
President Trump’s conditional stance on the Iran deal and the IEA’s projection of significantly higher supply volumes in 2027 are key factors influencing the market, raising concerns about a potential oil overhang.
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Oil prices experienced a downturn on Thursday, influenced by reports of a potential peace deal between the U.S. and Iran aimed at ending the Middle East conflict. Simultaneously, the International Energy Agency (IEA) issued a forecast predicting a significant oil supply surplus for the upcoming year.
International benchmark Brent crude futures for August delivery fell by 1.13% to $78.65 a barrel. Similarly, U.S. West Texas Intermediate (WTI) futures for July saw a 1.26% decrease, settling at $75.82 per barrel.
Adding a layer of uncertainty to the market, President Donald Trump reportedly stated that the U.S. could re-engage in hostilities with Iran if the nation fails to uphold the terms of the agreement. "We're going to bomb the hell out of them if they violate the agreement," Trump was quoted as saying, though he expressed a preference for the deal to be honored.
The IEA's latest monthly oil market report anticipates that a stable resolution to the conflict could lead to a substantial increase in oil supply volumes, potentially creating a significant market overhang in the coming year. The agency projects global supply to drop by an average of 3.9 million barrels per day in 2026, reaching 102.4 million barrels per day, before rebounding to 110.3 million barrels per day next year. "Our first look at 2027 balances shows a significant overhang emerging next year," the IEA noted.
While a decrease in oil prices might mitigate concerns about energy costs contributing to broader inflation, it is not yet a sign of complete market stability, according to a report by New York Life Investment Management. The report emphasizes that oil prices remain elevated compared to pre-conflict levels, the normalization of shipping routes will take time, and both commercial and strategic oil inventories require replenishment.
