(Bloomberg) — Oil headed for the longest losing run in 10 months on gathering expectations that a US-Iran deal to reopen the Strait of Hormuz will unleash a wave of supply, loosening the global crude market.

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Global benchmark Brent retreated for a fifth day to below $79 a barrel, trading near a three-month low, while West Texas Intermediate was near $76. The interim pact, which is due to be signed on Friday, offers Tehran broad financial incentives, including the right to sell its oil immediately.

Crude prices have retreated sharply in recent weeks as moves to end the war between Washington and Tehran are seen easing tightness in global energy markets. Producers, shippers and traders are now assessing whether the agreement will prove to be durable, and how long it will take for vessel transits of the Hormuz chokepoint to be revived in earnest.

“Most traders still believe US naval operations will likely be escorting for the first few weeks, and mine-sweeping ships will also be present, which will slow the flow of traffic,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc. “Still, the futures market is always looking in the distance, and for now the odds are increasing that oil will be moving.”

While technical details are still being finalized and some language may be changed, a 14-point draft memorandum offers the clearest picture yet of the deal, which will pave the way for 60 days of talks aimed at formally ending the war and imposing strict new limits on Iran’s nuclear program.

The points include a requirement for Tehran to ensure the movement of merchant ships and for the US to lift its own blockade of Hormuz. The narrow waterway connects the Persian Gulf to the Indian Ocean, and in peacetime it used to carry about a fifth of global oil supplies.

“We’re talking about a gradual resumption, rather than back to normal in one go,” Parash Jain, HSBC Holdings Plc’s global head of transport and logistics research, said in an interview on Bloomberg Television. “The last thing that shipping lines want is that they spend two months to reroute all the vessels, only to get to know that actually they need to reroute it back.”

Also covered in the draft memorandum is a commitment by Washington to issue waivers for exports of Iranian crude, petrochemicals and their derivatives, and all related services, including banking, insurance, and transport.

The market’s rapid loosening is reflected in Brent’s much narrower prompt spread, with the difference between the benchmark’s two nearest contracts at just 20 cents a barrel in backwardation on Wednesday. While that remains a bullish pattern — with the nearer price above the later-dated one — the gap had closed at $9.65 in early April on concerns about near-term supplies.

The slump in crude has helped to drag product prices lower, easing inflationary pressures and the burden on consumers. In the US, average nationwide gasoline has dropped back toward $4 a gallon, after peaking above $4.56 in May, according to data deromthe American Automobile Association data.

The impact of shifts in energy costs will be among factors considered Wednesday at the Federal Reserve, as policymakers meet to decide on interest rates. No change in borrowing costs is expected at this meeting.

Although a revival in supply is widely expected, crude stockpiles have still been drawing at a rapid pace. A US industry group estimated that US inventories sank by 8.3 million barrels last week, including a big fall at the hub in Cushing, Oklahoma. Official data are due later on Wednesday.

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