West Texas Intermediate pared earlier gains on Wednesday yet held firmer on renewed supply-risk concerns tied to Middle East tensions. WTI was around $73.60, up 2.20% on the day, after touching an intraday peak of $75.73, a two-week high. Shipping through the Strait of Hormuz had been returning towards normal following last month’s interim peace agreement between the United States and Iran, but fresh hostilities reintroduced a geopolitical risk premium into oil pricing. Iran’s Press TV reported that Tehran would close the Strait in the event of further attacks, after commercial vessels were struck earlier in the week by the Islamic Revolutionary Guard Corps (IRGC).
In parallel, US inventory data pointed to looser near-term balances. The Energy Information Administration (EIA) said US commercial crude stocks rose by 2.998 million barrels in the week to 3 July, whereas markets had been positioned for a 1.9 million-barrel draw, ending a 10-week decline in stockpiles. In broader context, WTI remains a benchmark “light” and “sweet” crude priced in US dollars, while supply-demand shifts, OPEC quota policy and weekly figures from the API and EIA can all influence price formation. OPEC comprises 12 producers and OPEC+ adds 10 non-OPEC members.
—Geopolitical Risk and Market Support
We see West Texas Intermediate crude holding firm, with recent price action suggesting a geopolitical risk premium is returning to the market. Renewed tensions in the Red Sea are disrupting key shipping lanes, creating supply uncertainty that is supporting prices above $82 per barrel. This situation mirrors past flare-ups in the Strait of Hormuz, where even threats of disruption caused significant price spikes.
—Inventory Builds, Volatility, and OPEC+ Outlook
This bullish sentiment is being challenged by fundamental data showing signs of weakening demand. The latest EIA report revealed an unexpected build in US crude inventories of 3.6 million barrels, defying forecasts for a drawdown and suggesting that supply is outpacing consumption. This surprise build ends a multi-week trend of declining stockpiles and puts a potential cap on how high prices can go.
Given these conflicting signals, we anticipate a period of heightened volatility in the coming weeks. The CBOE Crude Oil Volatility Index (OVX) has already climbed over 15% in the last month, reflecting the market’s uncertainty. We believe that derivative traders should consider strategies that profit from large price swings, rather than betting on a specific direction.
The upcoming OPEC+ meeting will be a critical catalyst for the market. Historically, the cartel has acted to defend prices by extending or deepening production cuts, as they did consistently through 2024 and 2025 to balance the market. We will be watching for any language that suggests a more aggressive stance to counteract signs of flagging global demand.
