Will Oil Prices Keep Falling with a US-Iran Deal and Rising US Stockpiles on the Horizon?

Oil prices dipped by 2% on Thursday, May 15, 2025, at 11:15 PM +04, settling at lower levels as markets reacted to the prospect of a US-Iran nuclear deal that could ease sanctions and flood the global market with additional crude supplies. Brent crude futures closed down $1.56, or 2.36%, at $64.53 per barrel, while US West Texas Intermediate (WTI) crude futures fell $1.53, or 2.42%, to $61.62. This decline reflects growing anticipation around a potential agreement, alongside other factors such as unexpected increases in US crude inventories and shifts in global supply dynamics, setting a cautious tone for oil markets as of 01:15 AM +04 on Friday, May 16, 2025.

The possibility of a US-Iran nuclear deal gained traction after a statement from the US leadership indicated that negotiations with Iran are nearing completion, with Tehran reportedly open to terms in exchange for lifting economic sanctions. Such an agreement could release an estimated 0.8 million barrels per day of Iranian crude, a development that could exert significant downward pressure on prices. This comes amid ongoing tensions, with recent US sanctions targeting Iranian efforts to produce ballistic missile components, following talks in Oman aimed at resolving nuclear disputes, highlighting the delicate balance between diplomatic progress and economic measures affecting oil supply.

Adding to the bearish outlook, US Energy Information Administration data revealed a surprising 3.5 million barrel increase in crude stockpiles to 441.8 million barrels last week, exceeding the anticipated 1.1 million barrel drawdown. This build, coupled with rising Black Sea CPC Blend crude exports projected at 1.6 to 1.7 million barrels per day in June—up from 1.5 million in May—signals a potential oversupply. Meanwhile, global supply adjustments by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) continue, though a recent revision lowered expectations for non-OPEC+ supply growth, adding complexity to the market’s direction.

The broader geopolitical landscape also influenced prices, with a missed opportunity for peace talks between Russia and Ukraine in Turkey reinforcing safe-haven demand concerns, though it tempered fears of immediate Russian supply disruptions. The International Energy Agency slightly raised its 2025 oil demand growth forecast to 740,000 barrels per day, up 20,000 from prior estimates, citing improved economic outlooks and lower prices boosting consumption. However, it anticipates a slowdown to 650,000 barrels per day for the rest of the year due to economic challenges and rising electric vehicle sales. As US stock markets showed mixed results—with the S&P 500 up 0.3% to 5,901 points and the Dow up 121 points to 42,377 points—oil’s trajectory will hinge on the outcome of the US-Iran negotiations and inventory trends in the coming weeks.