Oil Prices Drop Over 20% in May, Largest Monthly Decline Since March 2020
Miles Bennett
Brent crude fell nearly 20% in May, its steepest monthly drop since the pandemic shock; traders are front-running a US-Iran ceasefire, but the $90 floor says no one fully trusts it.
How far did prices fall?
Brent July contracts dropped nearly 20% in May, closing at $90.71/barrel. WTI (the US benchmark) fell 17%, ending at $86.83/barrel.
This is the largest single-month decline since the March 2020 Covid demand shock. WTI's four-month winning streak is over.
In plain terms = oil lost a fifth of its value in one month, yet both benchmarks remain well above the pre-war level of roughly $60/barrel — the market is pricing peace but keeping a safety cushion underneath.
Why did prices crash so suddenly?
One driver dominates: traders are betting a US-Iran ceasefire is imminent, which would ease the supply disruption at the Strait of Hormuz — the chokepoint for roughly one-fifth of global oil shipments.
Chevron CEO Mike Wirth told Bloomberg the market psyche has shifted to "this is closer to the end than the beginning," pressing down the forward curve.
This means → traders are not watching whether tankers can pass the strait today; they are pricing a scenario in which the strait reopens within three to six months.
How close is the ceasefire, really?
US and Iranian negotiators have reportedly reached a preliminary agreement to end the Middle East conflict, but it still requires final sign-off from President Trump and Iranian leaders.
Trump posted on Truth Social on Friday that he was meeting in the White House Situation Room "to consult on a final decision."
Put simply = there is a framework, but no signature — and the distance between the two can be very short or very long.
Why do analysts say traders are "exhausted"?
SPI Asset Management managing partner Stephen Innes calls the current environment a "headline roulette" — every day brings fresh ceasefire rumors, missile headlines, draft deals, denials, and market reversals.
RBC Capital global commodities strategist Helima Croft describes the trader mindset as "Memento-style thinking" — treating every "almost there" statement from the Trump administration as breaking news, even as nuclear talks and strait-control disputes remain unresolved.
This reflects not a loss of fundamental judgment but information noise too dense to filter — each headline toggles probability between "peace" and "escalation."
Where does oil go from here?
Innes's base case: Brent finds support near $90/barrel, but normalization "may not come soon — and may not come at all."
Sevens Report analyst Tyler Richey notes the market began pricing a peace path as early as early April, when the first ceasefire was announced; a 60-day ceasefire deal may be a more important step, but it is not the finish line.
RBC's team warned in a Thursday client note: with the war entering its third month, "the global energy buffer is draining fast, and the window to reopen the strait and avoid a hard landing is closing."
Content is for reference only, not financial advice.