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(Bloomberg) — Oil steadied after the biggest quarterly drop since the pandemic, as traders monitored peace talks between the US and Iran and the return of shipping through the Strait of Hormuz.
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Brent traded above $73 a barrel, after sinking by almost a third over the past three months, while West Texas Intermediate was near $70. US negotiators Jared Kushner and Steve Witkoff had positive discussions in Qatar and technical talks with Iran are moving ahead, a senior administration official said. The duo were in Doha for indirect talks to ease tensions over the critical waterway that connects Persian Gulf producers to world markets.
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Crude has fallen in recent days as the warring parties continued discussions to reach a more lasting accord, although recent attacks around Hormuz have marred negotiations. Oil tanker traffic is now showing signs of recovery, and has picked up since the US and Iran exchanged strikes over the weekend.
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“We expect that by the end of July this is done,” said Samantha Dart, co-head of global commodities research at Goldman Sachs Group Inc., referring to the conflict. “Once we have a normalization of flows through the strait, the expectation is that we go into an oversupply.”
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Goldman Sachs pegs the surplus at close to two million barrels a day next year, even after accounting for restocking of global strategic petroleum reserves following the Iran war. Morgan Stanley has also warned of a looming glut as flows through the strait return faster than expected, cutting its price forecasts for the second time in about two weeks.
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Markets are now contending with a gush of crude from other sources too. Iran said it exported more than 40 million barrels of oil since the US lifted its naval blockade, while Russian shipments are surging to records, causing a major buildup of barrels at sea.
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Iran has reiterated its determination to control maritime traffic through the strait, a reminder that key sticking points — including over the country’s nuclear program and and end to fighting in Lebanon — remain in place and stand to complicate discussions during the 60-day ceasefire window.
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Traders will also be looking to US crude inventory data due later Wednesday. That comes after Energy Information Administration data published last week showed nationwide stockpiles hit their lowest level since 1984.
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