“Sentiment in the market is still broadly negative with the prospect of an Iranian nuclear deal, while demand concerns continue to linger,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore.

The Biden administration is weighing up Iran’s response to the EU proposal, with officials on both sides of the Atlantic signalling the possibility that a deal could emerge after more than a year of false starts. While Goldman is sceptical, the investment bank said there could be a front-loaded increase of Iranian output by around 1 million barrels a day if an agreement is reached.

Additional supply could heap more pressure on prices as concerns over an economic slowdown cloud the demand outlook. Time spreads have narrowed significantly, signalling an easing of tight crude markets.

Oil is still up around 15% this year, and the International Energy Agency remains bullish on the outlook for demand growth as soaring natural gas prices spur greater use of crude. Sweden is the latest country to lean on oil-fired power in a bid to bring the cost of power production down.

Severe heat waves in China, Europe and the US are also straining power grids and hampering the delivery of commodities as rivers drop to low levels. Energy conservation advisories are surfacing as regions struggle to meet summer demand in what could be a prelude to an energy crisis during winter.

Meanwhile, the American Petroleum Institute reported crude inventories fell by 448,000 barrels last week, while petrol stockpiles increased by more than 4 million barrels, according to a person familiar with the figures. Government data is due later Wednesday.

Oil markets have been transfixed in recent days by the possibility that an agreement could be struck to save the Joint Comprehensive Plan of Action, a nuclear pact that was abandoned by former US president Donald Trump. Given that an accord could clear the way for Tehran to resume crude exports without US sanctions, global benchmark Brent closed on Tuesday at the lowest since February.

At present obstacles remain, especially regarding so-called continuity guarantees the US is unable and unwilling to provide, the analysts said. In addition, Iran has “weak incentives” to agree given it’s already exporting about 1 million barrels a day while also making progress toward medium-term nuclear goals, they said. BM