Oil prices are on track to plunge 19% in May, with Brent crude futures set to record their steepest monthly decline since 2020, as market speculation grows over a potential U.S.-Iran agreement. On Friday, Brent front-month futures traded flat at $93.84 per barrel, while the U.S. benchmark WTI Crude edged down 0.12% to $88.94 a barrel.
The sell-off comes despite what analysts describe as the biggest physical supply disruption in history, suggesting traders are pricing in a diplomatic resolution that could bring Iranian barrels back to market. The anticipated deal has overwhelmed concerns about tight supply, driving a sharp revaluation of near-term fundamentals.
Wall Street firm Bernstein Research has issued a contrasting long-term view, setting $75 per barrel as a reasonable target for equity valuations. Analyst Neil Beveridge warns that higher spot prices and a tightening physical market are feeding inflation back into the supply chain, with global marginal production costs projected to climb to $77 per barrel.
Geopolitical dynamics remain central. A U.S.-Iran deal would unlock sanctions-hit Iranian exports, potentially adding 1-2 million barrels per day of supply at a time when OPEC+ discipline is already fraying. Yet the path to an agreement remains uncertain, with negotiations subject to political headwinds in both Washington and Tehran.
Critics argue the market may be overestimating the likelihood of a swift deal. Bernstein's long-term forecast, meanwhile, could be upended if demand weakens more than expected or if OPEC+ shifts strategy to defend market share, keeping prices below marginal cost for an extended period.