West Texas Intermediate (WTI) crude oil dipped to around $61.20 during Friday’s Asian trading session, as traders reacted to rising expectations of a potential nuclear agreement between the United States and Iran—an outcome that could unlock additional Iranian oil supply and pressure prices further.
On Wednesday, a senior adviser to Iran’s supreme leader signaled Tehran’s willingness to strike a nuclear deal with U.S. President Donald Trump, contingent on the lifting of economic sanctions. Trump followed up on Thursday by suggesting the two nations were nearing a deal, stating that Iran had “sort of” accepted the proposed terms.
The prospect of renewed Iranian crude entering the market is casting a bearish shadow over oil prices. According to SEB analyst Ole Hvalbye, “Immediate sanctions relief stemming from a nuclear agreement could unlock an additional 0.8 million barrels per day of Iranian crude for the global market—an undeniably bearish development for prices.”
US Crude Inventories Jump Unexpectedly
WTI was also weighed down by an unexpected build in U.S. crude oil inventories. The Energy Information Administration (EIA) reported a 3.454 million barrel increase in U.S. stockpiles for the week ending May 9, in contrast to the prior week’s 2.032 million barrel decline. Analysts had anticipated a drawdown of 1.0 million barrels, adding to concerns about oversupply.
The surprise inventory rise has sparked investor caution, as excess supply could further pressure oil prices if demand fails to keep pace.
Weaker Dollar Offers Limited Support
Despite bearish supply-side developments, a weaker U.S. dollar helped cushion some of the downside for oil, which is priced in dollars. The dollar’s retreat followed softer-than-expected inflation data. The U.S. Producer Price Index (PPI) rose just 2.4% year-over-year in April, down from 2.7% in March and below market expectations of 2.5%.
The softer inflation print suggests that companies may be absorbing the cost pressures from tariffs, reducing expectations for further interest rate hikes and weakening the dollar. However, the currency dip alone was not enough to offset the downward pressure from supply concerns and geopolitical developments.
As traders digest the implications of a potential Iran deal and rising U.S. inventories, WTI remains under pressure heading into the end of the week.
