Brent crude oil falls below $80 for the first time in three months, a US-Iran agreement is expected to unleash a "flood" of supply.

With the imminent agreement between the US and Iran on the navigation of the Strait of Hormuz and market expectations of a recovery in crude oil supply, the international benchmark Brent crude oil price fell below $80 per barrel for the first time in over three months. At the same time, several top Wall Street investment banks have lowered their oil price forecasts, with key indicators in the oil market weakening across the board. Brent crude oil saw its largest intraday drop of 4%, potentially setting a record for the longest continuous decline this year. The US and Iran are scheduled to sign a temporary agreement in Switzerland on Friday, but the full text of the memorandum of understanding has not yet been publicly disclosed by either party. Both Morgan Stanley and Goldman Sachs have lowered their oil price forecasts for the next few quarters. Goldman revised its estimate, believing that Persian Gulf crude oil exports will return to pre-war levels by the end of July, a month earlier than previously predicted. Benchmark futures contracts for Dubai and Murban crude oil in the Middle East have switched to a bearish contango structure, signaling an oversupply in the market. This change comes as the region is expected to release more oil supply, and the UAE continues to actively market its crude oil cargoes through tenders. The fall in oil prices to their lowest level since early March has essentially erased all gains made during the geopolitical conflict period. As the Federal Reserve convenes this week for its monetary policy meeting, this undoubtedly eases inflationary pressures. However, there are still many unknowns regarding the implementation of this temporary agreement, and the market has many doubts: the safety of the waterway and the regulations for passage are not yet clear, and whether this vital channel, responsible for transporting about a fifth of the global crude oil supply, can maintain its zero-toll policy remains uncertain. The lack of details in the agreement has left the market uncertain about the prospects of the waterway reopening. Officials in the Persian Gulf energy industry have stated that crude oil buyers have been continuously inquiring about whether oil can be transported outside of the Strait of Hormuz; shipping company executives and traders have also stated that they will not make arrangements for ships to resume that route until they receive clearer guidance. In a report, analysts from Morgan Stanley, led by Martin Ratz, wrote, "Many terms are still awaiting negotiation, and core risks have not been eliminated. However, at this stage, this agreement is a key step in easing geopolitical conflicts and restoring crude oil exports through the Strait of Hormuz. We estimate that by September, oil capacity in the strait can recover to half of pre-war levels, and by December, it will rise to 80%, with the pace of recovery slightly faster than previously estimated." Goldman Sachs analysts in Dan Strubin's team have lowered their oil price forecasts for the fourth quarter, with an average projected price for Brent crude oil of $80 per barrel, a $10 decrease from their previous forecast. In contrast, Royal Bank of Canada Capital Markets has a more cautious attitude. Analyst Helima Croft referenced benchmark data from February 27 before the outbreak of the geopolitical conflict and stated, "We believe that it will take several months for oil capacity to recover to near pre-war levels, and the peak oil transportation volume through the Strait of Hormuz may have already become a thing of the past." Previously, the Strait of Hormuz was almost shut down by dual blockades from the US and Iran, leading to a significant reduction in the scale of Middle Eastern crude oil exports and a continuous depletion of global commercial crude oil inventories and strategic reserves. Data released on Monday showed that the US Strategic Petroleum Reserve has reached its lowest level since 1983.