WTI ended Thursday at an 18-week low, erasing the risk premium that had lifted crude above $110 during this year\u2019s conflict, and pulling the benchmark back to pre-war conditions. Prices are now below the 50-period EMA near $83 and the 200-period EMA close to $78, as supply growth from the US, Guyana and Brazil coincides with inventories near multi-year peaks. Despite a live dispute over charges for transiting the Strait of Hormuz, the market has treated the issue as a marginal cost factor rather than an immediate supply threat.<\/p>\n
Policy focus has also shifted as weaker crude feeds into lower headline inflation. That dynamic supports a Federal Reserve that can keep rates unchanged, with commentary linking the move to this week\u2019s soft US jobs data, while prices in the high $60s reinforce the disinflationary impulse. On technicals, resistance sits at $70 and then $72, while support is seen near $65 and in the low $60s; momentum gauges remain stretched, with the daily Stoch RSI near 6.<\/p>\n
We are now trading a market where the war premium has completely vanished, leaving prices at an 18-week low. The latest Energy Information Administration (EIA) report from this past week confirmed a crude inventory build of 3.5 million barrels, defying expectations of a draw and reinforcing the oversupply narrative. This fundamental reality of too much oil is now the primary driver of price.<\/p>\n
The supply glut isn’t a theory; US crude output is holding near record highs of 13.4 million barrels per day according to June figures. Meanwhile, demand catalysts are nowhere to be found, underscored by China\u2019s latest manufacturing PMI for June slipping to 49.8, signaling economic contraction. Historically, such a disconnect between high supply and weakening demand, seen after the 2022 price spike, leads to a sustained period of lower prices.<\/p>\n
We see the ongoing threats over the Strait of Hormuz as political noise rather than a genuine supply risk. Even after Iranian officials reiterated their “service fee” plan on Wednesday, the market sold off, proving it views this as a simple tax, not a blockade. Tehran needs the oil to flow to collect its fee, making a shutdown counterproductive to its own goals.<\/p>\n
Given this, the strategy for the coming weeks is to use any strength toward the $70-$72 per barrel level as an opportunity to initiate bearish positions. For derivative traders, this could mean buying puts or establishing put spreads to capitalize on further downside while defining risk. We are not interested in bullish calls until the fundamental picture changes dramatically.<\/p>\n
However, with momentum indicators so deeply oversold, we are not chasing the price lower here. Patience is key, and we will wait for a relief rally to offer better entry points for new shorts. These brief, sharp bounces are common in strong downtrends and provide more favorable risk-reward opportunities.<\/p>\n
Our bearish conviction will remain intact unless WTI can reclaim the 200-period moving average, currently near $78. A sustained break above that level would signal a structural shift, forcing us to abandon short positions. Short of that, the path of least resistance remains to the downside, with support levels near $65 and then the low $60s.<\/p>\n\n\n\n