WTI has fallen back toward $84 per barrel after the United States and Iran paused military attacks, reducing immediate fears of a deeper disruption to Middle Eastern oil exports. The benchmark dropped by more than 5% on Monday after trading above $90 last week, while Brent retreated toward $92.
Nevertheless, the pause remains fragile, and shipping through the Strait of Hormuz has not fully normalized, leaving crude vulnerable to renewed geopolitical volatility.
U.S. stock build adds pressure
The latest EIA report offered additional support to sellers. U.S. commercial crude inventories increased by 2.0 million barrels in the week ended July 17, reaching 411.7 million barrels. Gasoline stocks rose by 0.8 million barrels, while distillate inventories gained 1.4 million barrels. Despite these increases, crude inventories remain 6% below their five-year seasonal average, and gasoline and distillate stocks are also comparatively low. This suggests that the physical market is not oversupplied, even though the latest weekly figures weakened the immediate bullish case.
Supply risks have eased, not disappeared
The broader supply outlook remains unusually uncertain. The EIA expects Middle Eastern production and trade flows to move gradually toward pre-conflict levels, but estimates that roughly 1.4 million barrels per day of production could remain offline during the fourth quarter. Global inventories have also been reduced considerably, meaning that rebuilding supply buffers may take time. Consequently, another escalation involving Iran, tanker traffic or regional infrastructure could quickly restore the risk premium that has been removed from prices during the latest selloff.
Inflation concerns retreat ahead of Fed decision
Lower oil prices have eased some of the inflation anxiety that recently pushed U.S. Treasury yields higher. The probability of a Federal Reserve rate increase at this week’s meeting has declined as crude retreated, although inflation remains above the Fed’s 2% objective and energy-related supply shocks remain a policy concern. Traders will now focus on the FOMC decision, second-quarter GDP and the latest PCE inflation data for signals about U.S. demand and interest-rate expectations.
Technical structure weakens below $88
The daily chart shows that the rebound from approximately $68 stalled near $94, where sellers returned aggressively. The subsequent decline below $88 and the short-term moving averages has weakened the near-term structure. Initial support is located around $82-80. A sustained break below this area, as I warned in WTI eases after rally as geopolitical premium meets supply uncertainty, could expose $76, followed by $72. On the upside, WTI must recover above $88-90 to reduce immediate downside risks, while a break above $94 would be required to revive the broader recovery scenario.
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