WTI has erased the war premium over the past three weeks and is trading near $68.50, while Brent is close to $72.00; both sit a couple of dollars above pre-war levels and are almost 40% below March extremes. Following a June 17 interim agreement between Washington and Tehran, shipping through the Strait of Hormuz has normalised and price action has tightened as the risk premium faded. The Brent\u2013WTI gap has settled around $3.50, a return to freight-and-quality pricing.<\/p>\n\n
OPEC+ has agreed to lift August quotas by 188K bpd, extending a planned 940K bpd restoration since the conflict, even as Gulf output continues to recover after losses of about 6 million bpd at the peak of the disruption. The UAE has exited the quota system, while the US is working through a 172 million barrel SPR release and domestic supply hit a record near 14 million bpd in May. Brent\u2019s curve moved into contango, with the six-month spread around minus 56 cents, and OPEC has cut its 2026 demand-growth forecast to under 1 million bpd. The next tests include EIA inventories on Wednesday at 14:30 GMT, FOMC minutes at 18:00 GMT, and an OPEC+ meeting on August 2; key levels include resistance at $70.00 and $72.00 for WTI, $74.00 for Brent, and support at $67.50, $65.00 and February bases near $62.00 for WTI and $66.50 for Brent.<\/p>\n\n
We see that the war premium has fully evaporated from crude oil prices, bringing WTI back near its February base of around $68.50. The market is no longer trading on geopolitical fear but is now forced to confront simple supply and demand fundamentals. For us, this means the path of least resistance is now lower.<\/p>\n\n
Supply is increasing from multiple directions, putting downward pressure on prices. Recent data shows OPEC+ compliance with production quotas has slipped, as key members increase output to gain market share. This comes as the U.S. continues releasing barrels from its Strategic Petroleum Reserve and domestic production remains near record highs of almost 14 million barrels per day.<\/p>\n\n
At the same time, demand signals are weakening, particularly from key consumers. Recent manufacturing PMI data from China slipped below 50, indicating a contraction in factory activity and therefore lower energy consumption. In the U.S., while the labor market is stable, a slight uptick in the unemployment rate to 4.1% has analysts trimming forecasts for peak summer driving demand.<\/p>\n\n
The futures market is confirming this bearish outlook, with the Brent curve now firmly in contango. The December 2026 contract is trading at a premium of over $1.00 to the front-month contract, meaning the market will pay us to store oil. This is a clear signal of near-term oversupply and a lack of immediate buyers.<\/p>\n\n
Given this, we are looking at any rallies toward the $70.00 WTI level as opportunities to initiate bearish positions. Buying put options with strike prices below $67.00 could offer a low-cost way to profit from a potential slide toward the February lows near $62.00. Selling out-of-the-money call options or establishing bear call spreads above the $72.00 resistance level is another strategy to generate income while maintaining a bearish bias.<\/p>\n\n
This week’s EIA inventory report on Wednesday is a key catalyst, especially after last week\u2019s report showed a surprise build of 3.1 million barrels. Another significant build would confirm the supply glut and likely push prices through recent support. The hawkish tone from the Federal Reserve’s last meeting also supports a strong U.S. dollar, which acts as a direct headwind for oil prices.<\/p>\n\n\n\n