Oil falls as progress in US-Iran talks cools supply concerns

By Nicole Jao

NEW YORK, July 1 (Reuters) - Oil prices fell on Wednesday as optimism over U.S.-Iran talks eased supply concerns after U.S. President Donald Trump said meetings in Qatar had gone well.

Brent futures were down $1.60, or 2.19%, to $71.35 a barrel at 11:42 a.m. ET (1542 GMT). U.S. West Texas Intermediate crude was down $1.21, or 1.74%, at $68.28 a barrel. Both benchmarks were at their lowest in more than four months.

"The negotiations that are currently taking place in Qatar are perceived as being positive (and) that has allowed prices to drift further," Saxo Bank analyst Ole Hansen said.

"There is a chance that we could see even lower prices."

Trump said on Wednesday the U.S. was getting along very well with Iran and that recent meetings in Qatar went well.

The U.S. and Iran held technical talks in Doha on Wednesday as they seek to agree on the flow of shipping through the Strait of Hormuz and secure a lasting ceasefire, a source with direct knowledge of the talks and an Iranian official said. The U.S. and Iran have sparred publicly over the meaning of the interim pact, exchanging military strikes over the past week.

In the U.S., crude inventories fell by 3.8 million barrels to 408.4 million barrels last week, the lowest level since September 2018, as domestic refinery demand rose ahead of the July 4 holiday weekend, the Energy Information Administration said on Wednesday. The draw, however, is smaller than analysts' expectations in a Reuters poll for a 4.5 million-barrel drop. [EIA/S]

Following five straight monthly increases, analysts have cut their 2026 oil price forecasts for the first time since the Iran war began, as the reopening of the Strait of Hormuz eased concerns over prolonged supply disruptions, a Reuters poll showed.

Brent fell by around $45 a barrel in the second quarter of this year, its largest quarterly drop since the global financial crisis in 2008. U.S. crude futures, meanwhile, fell by around $31, their largest quarterly decline since 2020, when the COVID-19 pandemic crushed global oil demand.  

The declines followed progress towards ending the Middle East conflict, after sharp gains in March triggered by the U.S.-Israeli attack on Iran.

Tanker traffic through the strait has started to recover, with U.S. Vice President JD Vance saying oil flows through the waterway had returned to pre-war levels, without citing figures.

Meanwhile, OPEC+ oil-producing countries will likely agree on a further hike in their output targets from August when they meet on Sunday, three sources said on Wednesday.

(Reporting by Nicole Jao in New York, Seher Dareen in London, Anushree Mukherjee in Bengaluru, Mohi Narayan in New Delhi and Georgina McCartney in Houston; Editing by Louise Heavens, Mark Potter and Chris Reese)