Oil prices remain headline-driven, taking direction from escalation and de-escalation in the U.S-Iran conflict in the near term. The first round of talks between the United States and Iran in Switzerland has concluded with positive comments from both sides, and an agreement to push for a final agreement within 60 days. However, there's considerable scepticism about whether more complex issues around nuclear technology and transit through the Strait of Hormuz can be fully resolved in the short timeframe. After all, the Joint Comprehensive Plan of Action (JCPOA) deal in 2015 took ~20 months of formal talks under former U.S. President Barack Obama. Brent crude for August delivery fell 4.79% to trade at $73.39 per barrel at 2.50 pm ET on Wednesday, the lowest settlement price since March 2nd, while the corresponding WTI crude contract was down 4.23% to change hands at $70.11/bbl. According to commodity analysts at Standard Chartered, the 200-day moving average (at $78.71/bbl on 23 June) has provided a level of support. However, that has proven to be insufficient during oil price selloffs at the 76.4% Fibonacci retracement at $73.74/bbl.Both crude grades are firmly in oversold territory, with a relative strength index (RSI) of 29.07 for Brent and 28.13 for WTI crude. StanChart reports there has been a sharp rise in confirmed crossings of the Strait of Hormuz, with 71 total transits recorded from 19-21 June. However, these transits remain opportunistic and cautious, with the Strait still vulnerable to short-term closure, particularly after US-Iran rhetoric escalated during the latest round of talks.While formal announcements around the timeline for normal operations to resume have been limited, the analysts project that oil supply normalization is unlikely to occur before the third quarter of the current year.StanChart is uncharacteristically bearish about the oil price outlook, saying the dramatic collapse in China’s crude imports is likely to keep a lid on oil prices.Indeed, China has shifted from relying heavily on importing physical cargoes to drawing on its extensive strategic reserves. China’s customs import data for May shows total crude oil imports fell to 7.82 million barrels per day, the lowest level since February 2018. Imports during the month were down 3.2 mb/d y/y (-29%), -1.58 mb/d m/m (-17%), and 4.76mb/d lower than February’s pre-conflict volumes (-38%). China cut back sharply on Middle Eastern crude imports from February, when the Iran war began, to May, notably from Iraq (-866 kb/d), UAE (-840 kb/d), Russia (-790 kb/d), Saudi Arabia (-392 kb/d), and Oman (-150 kb/d). China also lowered crude imports from Malaysia by 900kb/d, which likely represents Iranian barrels, and Congo by 179kb/d. Meanwhile, it increased imports from South Sudan (+120 kb/d), Canada (+71 kb/d), Indonesia (+65 kb/d), Colombia (+27 kb/d), and Brazil (+10 kb/d), showcasing a diversification in cargoes as Gulf barrel exports were constrained. Total crude imports from Russia totalled 1.967 mb/d, with Saudi Arabia second at 1.337 mb/d, while Brazil was not far behind at 1.278 mb/d. StanChart says the timing of China’s return to the physical cargo market will be critical to the rebound in global demand and the oil price trajectory into the end of the year.That said, StanChart has highlighted some notable bifurcations in refined products markets. Whereas the geopolitical risk premium has been reduced across most refined products, middle distillates are increasingly trading on economic fundamentals rather than geopolitics, with diesel and gasoil struggling under the weight of softer industrial demand. However, strength remains in gasoline, with the RBOB-Brent crack currently at $43.04/bbl, the highest level in nearly four years, while the RBOB-WTI crack is sitting at a six-week high of $50.54/bbl. According to StanChart, refiners are optimized for gasoline production during high summer demand. Meanwhile, U.S. gasoline inventories are notably tight at 214.24 million barrels on 12 June, 14.29 mb below the five-year average. Retail prices continue to soften: the American Automobile Association (AAA) quoted the national average retail gasoline price stood at $3.928/gallon on Wednesday, down from a high of $4.564/gal on 20th May.StanChart notes that attention is gradually turning back towards the dramatic escalation in Ukrainian attacks on Russian refining assets, affecting supplies of gasoline and diesel in particular, providing some level of structural support. Recently, we reported that the giant Moscow Oil Refinery is highly unlikely to resume production before early 2027 following severe structural damage caused by repeated Ukrainian long-range drone strikes. The plant produces 2.9 million tons of gasoline and 3.2 million tons of diesel annually, satisfying roughly 40% of Moscow's overall fuel market and 70% of the capital region's fuel and aviation kerosene demand. A series of targeted attacks in mid-June completely halted operations at the Gazprom Neft-operated facility in Kapotnya. Industry sources indicate that necessary repairs will take a minimum of six months, though a more pessimistic outlook pushes the timeline into next year.By Alex Kimani for Oilprice.comMore Top Reads From Oilprice.comChina’s Teapot Refineries Cut Operations to Their Lowest Level Since 2017Adani Targets 10 GW Nuclear Power Capacity in India by 2035VLCC Earnings Near $470,000 a Day as Hormuz Hopes Drive Tanker Frenzy