WTI has remained under selling pressure as CTA liquidation approaches its end, even as crude exports through the Strait of Hormuz have held at 6–6.5m b/d over the past two weeks. Iranian shipments now account for almost half of those Hormuz transits, while floating crude in the Mideast Gulf has contracted quickly, down by nearly 30m barrels over the same period. With about 40m barrels of floating supply left in the Gulf, the current pace of flows is framed as sustainable for roughly another week, after which volumes would depend more on Iranian exports and higher production, implying reduced throughput.
At the same time, the physical balance is described as tightening, with global inventories drawing at a fast rate. With SPR flows and US exports expected to slow into July, inventory draws are positioned to accelerate outside the US. Product markets are also firm: petroleum crack spreads are said to remain robust as demand stays strong, supporting elevated refinery run rates.
Focus On Strait Of Hormuz Flows And Technical Selling
We see that the market is currently focused on the heavy flow of oil coming out of the Strait of Hormuz, which is keeping a lid on prices. This bearish sentiment is being amplified by technical selling from funds, but we believe this pressure is nearing its end. This pattern is reminiscent of the sell-off in late 2025, which occurred just before a significant price rebound once the technical selling was exhausted.
We are paying close attention to the amount of crude stored on tankers in the Mideast Gulf, which has plummeted by almost 30 million barrels in the last few weeks. This indicates the current high rate of exports cannot last much longer, likely only for another week or so. Once this floating storage is depleted, the visible supply of oil to the market should tighten noticeably.
Outlook For Prices And Positioning Opportunities
The underlying fundamentals strongly support a move higher, as global inventories continue to fall, with the most recent weekly U.S. government report showing a draw of 2.5 million barrels. At the same time, refinery profit margins, known as crack spreads, remain robust at over $28 per barrel due to strong summer fuel demand. This gives refiners a powerful incentive to continue buying crude oil to process, which will support prices.
Therefore, we are looking at the current price weakness as an opportunity to position for higher prices in July and August WTI contracts. This could involve buying call options to capitalize on a potential rebound while defining our risk. The key is to act before the market’s focus shifts from the temporary supply glut to the more powerful story of shrinking global inventories.
