WTI stayed below $70 as traders priced in rising Middle East supply and a gradual recovery in exports despite continuing risks around the Strait of Hormuz. West Texas Intermediate fell 3.25% on Friday to about $69.05, after touching $68.48, its lowest since late February, extending a weekly decline as markets leaned towards a rebound in global supply following disruption linked to the conflict with Iran.
Oil flows through the Strait of Hormuz were seen improving, with QatarEnergy issuing its first July–August crude tender since the conflict began and Saudi Aramco resuming loadings at Ras Tanura after months of disruption, alongside extra volumes from Iraq, Kuwait and Abu Dhabi. US Energy Secretary Chris Wright said tanker traffic was close to pre-conflict levels, with around 20 million barrels transiting on Wednesday, and he added that Venezuelan output is rising rapidly. Commerzbank pointed to incomplete normalisation in shipping and said combined US inventories of crude, gasoline and distillates are about 7% below the seasonal average, while Rabobank referenced an attack off Oman even as markets expect the US-Iran memorandum of understanding to hold.
Market Consensus and Supply Risks
With West Texas Intermediate crude oil holding below $70 a barrel, we believe the market is overly confident about a smooth recovery in Middle East supply. The current price reflects an optimistic consensus that overlooks significant underlying risks. This creates a compelling setup for derivative traders who are positioned for a potential price rebound.
The most recent Energy Information Administration (EIA) report from June 24, 2026, showed a surprise crude inventory draw of 2.1 million barrels, tightening the market further. US commercial crude inventories now sit at approximately 448 million barrels, which is nearly 8% below the five-year average for late June. This thin cushion leaves prices highly vulnerable to any real or perceived disruption in global supply flows.
Positioning for Volatility and Potential Price Spikes
Given this backdrop, we see implied volatility in WTI options as attractively low, with the CBOE Crude Oil Volatility Index (OVX) hovering near 28. This suggests the market is not pricing in the fragile security situation in the Strait of Hormuz or the risk of a slower-than-expected supply return. We are therefore positioning for a potential price increase by purchasing August and September call options to capitalize on a shift in market sentiment.
Historically, events like the 2019 attacks on Saudi oil facilities have shown how quickly prices can spike when supply chains are threatened. We will be closely monitoring weekly inventory reports and any shipping alerts from the Persian Gulf. Any indication that supply is not normalizing as quickly as expected could serve as a powerful catalyst for a sharp move higher.
