Oil prices are continuing their downward trend. Brent crude has fallen below $78 per barrel after a 3.3% drop on Monday, the most significant decline in almost a week, while WTI approaches $72. The catalyst for this move was the latest signs of progress in the Iranian negotiations, the most notable of which was a 60-day U.S. license allowing the sale of certain Iranian oil products on the international market.

The mechanics of this license are crucial. It allows virtually any buyer to acquire and pay for Iranian oil, including U.S. refineries, although some are still hesitant to take on reputational and legal risks. For Tehran, this is an economic lifeline, providing a legitimate opportunity to return oil to the world market after months of blockade.

Physical signs of recovery are already evident. In the past week, Iran has shipped over 30 million barrels, and Qatar is sending more empty LNG tankers through the Strait of Hormuz, indicating preparations to increase exports. Four tankers have passed through the strait without concealing their location.

However, an important nuance should be noted. The market may be pricing in an oversupply before it has materialized, just as it had previously priced in a shortage before production declines materialized. Oil tends to overestimate the situation in both directions. This is a valuable observation, as the current drop below $78 could be excessive if the physical recovery of supplies takes longer than expected.

Currently, negotiations in the Middle East have entered a phase of prolonged technical disputes, and disagreements are already emerging. Vance stated that Iran agreed to allow nuclear inspectors in, while Tehran disputes this. Ahead are complex issues, including Iran's nuclear capability, the status of the ceasefire in Lebanon between Israel and Hezbollah, and the safe opening of the Strait of Hormuz. Any one of these knots could stall the entire process for weeks.

As for the current technical picture of oil, buyers need to reclaim the nearest resistance at $74.85. This will allow targeting $81.38, above which it will be quite challenging to break through. The furthest target will be around $86.67. In the event of a decline in oil prices, bears will try to take control of $67.77. If they succeed, breaking through this range will deliver a severe blow to the bulls' positions, pushing oil down to a low of $59.96 and potentially reaching $51.99.