01.07.202609:19 Forex Analysis & Reviews: Oil Stabilizes After Historic Quarterly Collapse

Oil has stabilized after a historic quarterly collapse, and the market is now awaiting the results of negotiations in Doha. Brent has exceeded $73 per barrel, recovering part of the nearly one-third drop over the past three months, the largest since the pandemic began. WTI is trading just below $70. According to media reports, U.S. negotiators Jared Kushner and Steve Witkoff held positive talks in Qatar, and technical negotiations with Iran are progressing.

Goldman Sachs noted yesterday that despite periodic escalations in the Strait region, U.S. energy exports and imports to China remain stable, confirming the market's movement in the right direction. The situation is expected to be fully resolved by the end of July. This is a key benchmark for traders who are now thinking not in weeks but in a specific one-month horizon.

It is this confidence in imminent resolution that is driving price forecasts downward, and quite sharply. According to Goldman Sachs, the market will experience a supply surplus of about 2 million barrels per day next year, even after accounting for the replenishment of global strategic reserves post-war. Morgan Stanley agrees with this logic and has lowered its price forecasts for the second time in two weeks, as flows through the Strait are recovering faster than expected. When the two largest banks on Wall Street independently reach the same conclusion about the impending surplus, it is a strong signal for the entire market.

The scale of the recovery in supplies is impressive and is supported by the numbers. Iran has stated that it exported more than 40 million barrels of oil since the removal of the U.S. maritime blockade. At the same time, Russian supplies have reached record levels. The combination of these flows has led to a noticeable accumulation of oil at sea, which physically indicates a surplus before it fully manifests in inventory statistics.

However, it is premature to say that the conflict has been completely resolved. Iran has once again confirmed its determination to control maritime traffic through the Strait and reminded that key contentious issues, including the country's nuclear program and the cessation of hostilities in Lebanon, remain unresolved. This could complicate negotiations during the entire 60-day ceasefire period.

The nearest benchmark for the market will be the U.S. crude oil inventory data, which will be released today. Last week, the Energy Information Administration reported that nationwide inventories fell to their lowest level since 1984, a legacy of wartime scarcity.

As for the current technical picture of oil, buyers need to reclaim the nearest resistance at $71.25. This will allow for aiming at $76.30, above which it will be quite challenging to break through. The furthest target will be around $81.38. If oil declines, bears will try to take control of $67.77. If they succeed, a breakout of the range will deliver a serious blow to the bulls' positions and push oil down to a low of $59.96 with the prospect of reaching $51.99.