WTI Slides 16% in Four Sessions to Three-Month Low on Hopes for U.S.-Iran Accord

International oil prices fell to their lowest level in three months amid expectations that the U.S. and Iran will reach an agreement to reopen the Strait of Hormuz.

West Texas Intermediate traded below $77 a barrel on June 16, extending its decline to a fourth straight session, Bloomberg reported. WTI has slumped about 16% over the past four trading days, its longest losing streak this year. Brent crude also finished below $79 a barrel.

The drop came as investors bet on a provisional agreement between the U.S. and Iran that is scheduled to be signed on June 19. The proposed deal reportedly includes reopening the Strait of Hormuz and allowing Iran to resume oil exports.

Traders say a normalization in Middle Eastern crude supply would ease concerns about a global energy shortage. As a result, the war premium that had built up in recent weeks is being unwound quickly.

Still, supply conditions may take time to return to normal.

Dennis Kissler, senior vice president at BOK Financial Securities, said most traders expect the U.S. Navy to escort tankers during the initial weeks while carrying out mine-clearing operations. Maritime traffic is unlikely to fully normalize for at least a month, he added.

Futures markets always price in future developments, Kissler said. The market is increasingly assigning a higher probability to a resumption in crude supply.

Meanwhile, crude inventories continued to decline despite expectations for increased supply. The American Petroleum Institute estimated that U.S. crude stockpiles fell by about 8.3 million barrels last week. Inventories at the Cushing, Oklahoma, oil hub also posted a sharp drop.

Official weekly U.S. crude inventory data from the Energy Information Administration is due later on June 16.