WTI remains vulnerable as rebound fails to reverse bearish trend

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WTI remains vulnerable as rebound fails to reverse bearish trend

Hormuz talks weaken risk premium

Progress in negotiations involving Washington, Tehran and regional mediators has reduced fears of an extended disruption to shipping through the Strait of Hormuz. Expectations that an agreement could restore tanker traffic have removed part of the geopolitical premium accumulated during the conflict. Maritime security remains uncertain and major disagreements have not been resolved, but the market is increasingly pricing a partial normalization of trade flows. Confirmation of a deal could accelerate the decline toward $74.00, while only another significant escalation would provide a credible catalyst for a sustained return above $80.

Inventory draw offers limited protection

The latest EIA report showed U.S. commercial crude inventories falling by 7.2 million barrels to 404.5 million, approximately 6% below the five-year seasonal average. Refinery utilization reached 97.2%, while gasoline and distillate inventories also remained below their respective five-year norms. These figures provide some underlying support, but they have not reversed the bearish price structure. High refinery activity may become less supportive as the summer driving season approaches its later stages, particularly if product demand weakens and refinery maintenance begins to reduce crude processing.

Economic slowdown clouds demand

U.S. GDP growth moderated to an annualized 1.5% in the second quarter from 2.1%, while June payroll growth slowed to 57,000 and job openings declined to 7.36 million. Total petroleum products supplied averaged 20.3 million barrels per day over the latest four-week period, down 2.3% from a year earlier. The combination of weaker economic momentum and softer petroleum consumption reinforces concerns about demand. Unless incoming employment and activity indicators improve, macroeconomic conditions are likely to remain an additional source of pressure on WTI.

Supply outlook reinforces bearish scenario

U.S. crude production is forecast to average a record 13.8 million barrels per day in 2026, while the normalization of Middle Eastern output and shipping could add further barrels to the global market. Expectations of smaller inventory draws during the third quarter and renewed stock accumulation in 2027 limit the scope for a sustained recovery.

As I noted in WTI tumbles below $80 as Hormuz deal hopes erase risk premium, the outlook therefore remains negative below $79.00. A confirmed break of $75.00 would expose $74.00, followed by the more significant $72.00 support area. Geopolitical escalation remains the principal upside risk, but current fundamentals leave the probability of further losses elevated.

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