WTI crude dropped $5.47 to $91.13 on Sunday, its lowest level since mid-April, after the Washington Post reported that US and Iranian negotiators have outlined a framework to extend the ceasefire and reopen the Strait of Hormuz within 30 days.
Brent fell $5.83 to $97.74. Both benchmarks lost roughly 6% on the session.
The deal taking shape
The framework would extend the April 8 ceasefire by 60 days while the two sides hammer out a final agreement. Under the terms reported by the Post, Iran would immediately begin reopening Hormuz and restore prewar shipping traffic within a month.
Trump told reporters on Friday that the deal was "largely negotiated" and would be announced shortly. Iran's foreign ministry called the proposal an initial memorandum of understanding. A broader agreement would follow, with negotiations running 30 to 60 days.
As of Sunday night, Iran had not signed. The proposal sits with Tehran's negotiators.
How the selloff built
The move didn't happen overnight. WTI broke below $100 last Tuesday after Trump predicted prices would "plummet" once a deal was reached. It then shed another $7 through Friday before gapping lower at the Sunday open.
From the month's high of $108.06 on April 29, WTI has now fallen 16%. Brent has dropped 13% from its $112.44 peak on May 4.
The selloff has played out in two stages. The first leg down came in early May when reports surfaced of a one-page deal framework. Prices recovered to the $101-$103 range through mid-month as talks stalled. The second leg, starting May 20, has been sharper and faster as concrete deal language emerged.
Three forces working against a rebound
Even if Iran reopens Hormuz tomorrow, oil is unlikely to snap back to pre-war levels. Several forces are working against prices at once:
Demand destruction is already baked in. Chinese seaborne crude imports dropped 3.6 million barrels per day between February and April, according to the IEA. Japan lost 1.9 mb/d and South Korea 1 mb/d over the same period. The agency now projects global consumption will shrink 2.4 mb/d in the second quarter compared with a year ago.
Supply is being rebuilt from outside the Gulf. OPEC+ added 188,000 bpd to its June quota at the May 3 meeting. The UAE, free of OPEC quotas after leaving the cartel on May 1, is pushing output toward 5 million barrels per day. American crude exports now outpace imports for the first time since the 1940s.
The forward curve has flattened. Traders have already started pricing in a Hormuz reopening. The steep backwardation that marked April's panic has eased, and put activity on Brent contracts has picked up sharply over the past week.
The frozen assets sticking point
One clause in the reported framework could slow things down. Under the deal, Tehran must start handing over its stockpile of highly enriched uranium before any frozen assets overseas are unlocked. A US official told reporters that Iran "gets nothing until they deliver."
That demand has derailed talks before. Tehran has pushed for sanctions to be lifted first in every previous round. If the two sides can't bridge that gap within the 60-day window, the market could reprice the risk premium higher, and fast.
What to watch
WTI traded as low as $90.32 today. The $90 level hasn't been tested since April 17, when the first wave of deal speculation swept through the market. A clean break below it would put the mid-$80s in play, where WTI sat before Trump called off an Iran strike on May 19.
If the deal collapses, the upside is just as steep. Brent's 52-week high sits at $115.89, and with 14.4 million bpd of Gulf production still offline according to the IEA, the supply hole hasn't gone anywhere. Only the expectation has changed.