Meanwhile, China is credited for buffering the worst effects of war-driven high oil prices: File Image/Pixabay

Positive sentiment towards the peace talks between the U.S. and Iran caused another session of losses for oil on Monday, with the first round of negotiations reportedly making “encouraging progress” and resulting in a 3 percent price decline in the commodity.

Brent ‌settled down $2.67, or 3.31 percent, at $77.90 per barrel, while West Texas Intermediate settled at $74.82 per barrel, down $1.78 or 2.3 percent.

Pakistan and Qatar, which are mediating the negotiations between the U.S. and Iran, released a joint statement that “encouraging progress had been made”; oil was also supported by U.S. vice president JD Vance, who on Monday insisted that the Strait of Hormuz “is open” to commercial shipping despite recent confusion over the state of the waterway.

After Washington temporarily eased oil restrictions against Iran due to the progress of the talks, oil exports from that country resumed to the tune of about 6 million barrels (destined for Singaporean waters), which UBS analyst ‌Giovanni Staunovo ⁠pointed out was “additional supply for the market” that was squeezed by the months-long war and continued to see drawdowns, the latest being a 9 million barrel draw last week from the U.S.’s emergency reserve, the third steepest draw on record, intended to help tame gasoline prices at the pump.

Two tankers carrying just under 2 million barrels of oil navigated the Hormuz on Monday, a step up from weaker flows on Sunday; also, the United Arab Emirates, Kuwait and Iraq have provided more oil to customers in the past week.

ANZ warned that full restoration of flows is unlikely this year; instead, it calculated that around 2 million ⁠to 3 million barrels per day (bpd) would be restored in the next four weeks, with a further 2 million to 3.5 million bpd potentially recoverable in the third quarter of 2026.

“Early gains will be driven by logistics (shipping) rather than production; later gains will depend on upstream and refinery recovery,” ANZ stated, adding that 1 million to 2 million bpd of supply ⁠could be permanently or semi-permanently lost.

Meanwhile, analysts including those at Societe Generale and Ember credited China for buffering the negative effects of higher oil prices at home as well as to the global economy, due to it cutting down on imports, relying on vast stockpiles, and utilizing more clean energy; they added that with China’s global energy influence growing, its policy and consumption patterns will be pivotal for the market regardless of how quickly flows through the Hormuz are restored.

Societe General described China as “the invisible hand that is rebalancing the market,” due to it curbing oil imports by about 3 million bpd, an amount nearly equal to Japan’s total crude demand.