WTI slips below $84 as U.S. inventories offset Middle East supply risks

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WTI slips below $84 as U.S. inventories offset Middle East supply risks

U.S. inventory build raises near-term caution

U.S. inventory data are giving the market a clear reason for caution. Preliminary API estimates showed commercial crude stocks rising by around 9.1 million barrels in the week ended August 7, while gasoline inventories fell by 1.5 million barrels and distillate stocks declined by 0.6 million. The crude build was far larger than expected and, if confirmed by today's official EIA report, could cap further upside in WTI. The previous EIA release for the week ended July 31 showed crude inventories rising by 2.5 million barrels to 407 million barrels, although stocks remained around 6% below the five-year average. Gasoline inventories were 7% below seasonal norms and distillates were 12% lower, pointing to continued tightness in refined products. The latest EIA report is due today at 14:30 GMT.

EIA, IEA and OPEC forecasts point to conflicting market signals

In its August outlook, the EIA assumes that restrictions on traffic through Hormuz will remain in place at least through the end of August, while disruptions affecting roughly 600,000 barrels per day of Middle Eastern supply could persist through the end of 2027. The agency expects Brent to average about $85 per barrel in the third quarter of 2026 before easing as inventories and supply recover, with an average price of around $69 projected for 2027. The IEA's latest assessment points to a considerably tighter near-term supply picture, with global oil inventories falling by 69 million barrels in July to below 7.9 billion barrels and the third-quarter market deficit estimated at around 1.8 million barrels per day, more than double its previous forecast. At the same time, the IEA expects global oil demand to contract by 1.6 million barrels per day in 2026 because of high prices and the economic impact of the conflict. OPEC remains more constructive, forecasting demand growth of around 0.8 million barrels per day this year.

WTI buyers retain the advantage despite pullback

The short-term balance of risks for WTI remains tilted to the upside as long as restrictions on flows through Hormuz persist and the risk of further escalation remains elevated. However, a large U.S. crude inventory build and a weaker global demand outlook are providing a meaningful counterweight to the geopolitical premium. Confirmation of an inventory increase of around 9 million barrels or more could trigger additional selling even if tensions in the Middle East remain high. Conversely, a smaller build combined with further shipping disruptions could bring buyers back into the market and revive a move toward recent highs.

Failure by buyers to break resistance around $84.60 triggered profit-taking on long positions, pushing WTI down toward $82.80. However, there is currently little fundamental justification for a broad-based selloff, meaning the pullback could attract renewed buying interest and allow bulls to retest the $84.00-$84.60 resistance zone. A break above $84.60, as I noted in WTI holds near $83 as Middle East risks keep volatility elevated, would open the way toward $85.00-$85.50, while a loss of support would expose the $82.00-$81.60 area.

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