WTI extends correction as Hormuz supply risks ease

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WTI extends correction as Hormuz supply risks ease

Inventory data add pressure on prices

Additional pressure today is coming from U.S. inventory data. Yesterday’s API report showed a 4.2 million barrel increase in crude oil inventories, while the market had expected a build of around 1.8-1.9 million barrels, and inventories had fallen by 0.328 million barrels a week earlier. This is increasing concerns that after a period of high summer refinery runs, the domestic balance is starting to become less tight.

The official EIA report for the week ended August 21 will be released later today. Previous EIA data already showed a 4.4 million barrel increase in commercial inventories to 428.8 million barrels, while production remained around 13.8 million bpd and refinery utilization reached a very high 97.2%. Therefore, another significant inventory build would become an additional bearish argument for WTI.

Global balance remains tighter than price action suggests

At the same time, the medium-term global balance remains significantly tighter than today’s price decline might suggest. The IEA expects global oil demand to fall by 1.6 million bpd in 2026, but at the same time forecasts a 4.3 million bpd decline in supply, as a significant portion of Persian Gulf production has still not recovered.

In July, observed global inventories fell by another 69 million barrels, while the cumulative decline since the start of the conflict reached around 410 million barrels. For the third quarter, the IEA estimates a deficit of roughly 1.8 million bpd, more than double its previous estimate. The EIA also maintains its forecast for Brent to average around $85 in the third quarter, assuming that disruptions through Hormuz will continue to limit global supply for some time.

$80-79.5 becomes key support zone

Therefore, the current decline in WTI is primarily related to expectations of a partial normalization of supply rather than an already emerging global oil surplus. Moreover, negotiations over Hormuz still do not guarantee a full reopening of the strait: Iran is proposing controlled commercial routes while simultaneously insisting on restrictions for military vessels, whereas Washington does not support all elements of the proposed framework.

Against this backdrop, the $80-79.5 area is becoming an important near-term support zone, and the risk of a decline toward it currently looks high. Holding this area could trigger a technical rebound toward $82-83 and then $84. A confident break below $80-79.5 would increase the risk of a move toward $78-77, while a return above $83, as written in WTI retreats as diplomatic hopes reduce geopolitical premium, would be the first sign that the decline in the geopolitical premium has already been largely priced in.

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