Looking to the Futures
Oil Moves Higher on Geopolitical Tensions
WTI crude closed higher Thursday after reports that a cargo ship was attacked near the Strait of Hormuz revived concerns over maritime security in one of the world’s most important energy corridors. The move followed a sharp pullback in oil prices to fresh six-month lows, driven by expectations that a cease-fire framework between the United States and Iran would allow stranded crude flows to resume. WTI August futures, /CLQ26, settled at $71.92 per barrel, up $1.58 from previous settlement.
With the signing of the Memorandum of Understanding (MOU) by US and Iranian officials, there is an agreed upon outline of topics which surround ending the war, determining access to the Strait of Hormuz, and limiting Iran’s nuclear program.
Since the agreement, vessels that had been trapped in the Persian Gulf have had more confidence to navigate the Strait of Hormuz. So far there have been an estimate of one hundred of ships to clear the strait, with 20 million barrels of oil, including Iranian oil, exiting the strait as stated by US Energy Secretary Chris Wright.
That progress was interrupted after the UK Maritime Trade Operations Center posted a report that a cargo vessel had been struck by a projectile, damaging the ship’s bridge. A US official later confirmed a drone attack on a Singapore flagged ship as it attempted to traverse the strait.
Prior to the attack, Iranian authorities warned vessels against transiting the strait outside designated routes. It is unclear how this will affect negotiations or the current cease fire in the region.
The weekly EIA petroleum report continues to show large draws against the crude inventories but a rise in gasoline and distillates which are near record low stocks. Commercial crude inventories declined by 6.1 million barrels to 412.1 million barrels, leaving inventories about 7% below the five-year seasonal average. Gasoline inventories rose by 2.1 million barrels to 216.3 million barrels, about 5% below the five-year average. Distillate inventories increased by 3.1 million barrels to 106.1 million barrels, roughly 10% below the five-year average. Refinery inputs averaged 17.1 million barrels per day, down 81,000 barrels per day from the prior week. Strategic Petroleum Reserve inventories fell by 9.1 million barrels to 331.2 million barrels.
Monthly oil market reports from OPEC and the International Energy Agency continue to highlight a meaningful disagreement over the direction of global balances.
The IEA forecasts global oil demand to decline by 1.1 million barrels per day year over year in 2026, before rebounding by 2.0 million barrels per day in 2027. The agency cited a steep drop in second-quarter deliveries, higher fuel prices, and disruptions to product availability as key drivers of the weaker near-term outlook.
On the supply side, the IEA expects global output to fall by 3.9 million barrels per day to 102.4 million barrels per day in 2026, before rebounding by 8.0 million barrels per day to 110.3 million barrels per day in 2027.
The OPEC market report forecasts global oil demand to grow by 1 million bpd YoY in 2026 then 1.7 million bpd YoY in 2027. OPEC anticipates supplies to grow by 0.6 million bpd YoY in 2026, and 0.1 million bpd YoY to an average of 8.9 million bpd in 2027.
The disagreement is interesting because if OPEC’s view is correct, the returning oil from the gulf may be absorbed by the market more easily. If the IEA’s view is correct, the market may face a larger near-term surplus once the disrupted supply returns.
Global inventories still need to be replenished, which could create demand for returning Gulf barrels as buyers look to refill depleted crude tanks. Brent’s brief move into contango supports that view. In a contango structure, near-term crude trades below later-dated contracts, encouraging physical traders to buy and store oil for future delivery when storage economics are favorable.
Technicals
August WTI Crude futures opened Friday’s trading at $71.44 per barrel, below the 50- and 200-day simple moving averages. The 50-day SMA closed at $86.94, and the 200-day SMA closed at $69.97.
The 14-day RSI crossed above the oversold threshold of 30% which may be indicative of near-term support.
The directional movement index is giving a clear bearish trend with an elevated ADX of 23.75. The positive directional index is sitting at a low 12.59 and the negative directional index at 31.11.
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