WTI crude is closing out July’s final week on the strongest fundamental note we’ve seen in months, with Brent spiking above $100 a barrel and WTI topping $92, both marking their highest levels since May. Unlike earlier rallies driven mainly by OPEC+ production cuts, this recent one is caused by growing concerns over supply disruptions throughout the Middle East. Those supply fears were further reinforced by the ongoing tightness of physical crude markets.
Now all eyes are on the next Fed meeting as well as the upcoming release of US inventory data, and on top of that, OPEC+ is also scheduled to meet on 2 August, so there are several key catalysts on the calendar before next week.
Middle East Risks Push Oil to Multi-Month Highs
Throughout the week, the main theme was the Middle East. Brent on Thursday set the new price at $100.69, a 7% increase in a single session. WTI ended the day at $92.19, its best closing price in 2 ½ months. The price of crude oil jumped higher when the Houthis, the militant group in Yemen, announced that it attacked oil tankers from Saudi Arabia in the Red Sea. This move raised fears about safety along the Red Sea.
The markets are keeping tabs on two major straits:
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Strait of Hormuz: According to the US EIA, 20 million barrels per day (mbpd) flow through the strait, amounting to 20% of the world’s petroleum liquids consumption.
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Bab el-Mandeb Strait: This area sees about 9 mbpd, connecting the Red Sea to the Gulf of Aden, and also connects much of the world’s oil to Europe.
If either of those straits experience prolonged disruptions, the world’s available supply is sure to drop dramatically.
Physical Oil Markets Confirm Tight Supply
The rally isn’t limited to just the futures prices; spot prices also have risen. According to Reuters:
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Dated Brent is about $105.70 per barrel.
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North Sea Forties is at $108.77.
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Dubai and Oman’s crude premiums more than doubled throughout the week.
Higher premiums for prompt cargoes mean that refiners have to pay a lot more for immediate delivery of crude oil.
OPEC+ Maintains Disciplined Production
Despite the higher price, OPEC+ continues to signal measured supply increases. The market expects that OPEC+ will announce another 188,000 barrels per day increase in production for September after the ministers gather on 2 August. That would be a continuation of the production increase plan that began back in June and continued throughout July and August.
Actual production increases have so far remained below target, since some members are still producing below their quota for a variety of reasons, and also due to geopolitical and technical reasons. Meanwhile, Saudi Arabia and Russia continue to prioritise price support over output levels.
Demand Outlook Remains Mixed
The demand story remains a major unknown.
While the International Energy Agency (IEA) projects global oil demand will drop approximately 1 million barrels per day in 2026 and rebound in 2027, the US EIA predicts petroleum usage will average about 101.9 million bpd this year.
China is the wildcard. The government stimulus measures continue to sustain industrial activity but the lower pace of manufacturing growth and real estate investment have dampened fuel demand. Meanwhile, strong summertime travel and aviation continue to prop up global consumption.
Federal Reserve Becomes the Main Catalyst
The Federal Reserve is now the top macro focus for energy markets next week. Despite expectations of a no-move from policymakers, market participants will pore over commentary regarding inflation and guidance for a September decision.
Persistently high energy prices make it more likely the Fed leaves rates higher for longer, strengthening the greenback and suppressing commodity demand. Inversely, any dovish rhetoric from Chair Kevin Warsh should remove the market pressure and allow WTI higher.
Other things to watch:
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The weekly EIA oil stocks.
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US refinery utilisation.
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China’s Manufacturing PMI numbers.
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News from Iran and the Red Sea region.
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OPEC+ stories leading into the Aug. 2 gathering.
WTI Crude Oil (USOIL) Technical Analysis: Bulls Retain Control Above $88.70
Technically, WTI has started the week trading safely above the $90 area, with prices still riding higher along the trend channel they entered in July.
The market is still sitting above the 50-period EMA at $84.53 and the 200-period EMA at $80.76, supporting a positive bias. The pullback looks like a correction rather than a reversal, while the RSI at nearly 61 means prices haven’t been overbought and market momentum hasn’t weakened.
The near-term support zone is $88.70-89.00. Maintaining this level allows buyers to remain in control and sets up another rally toward $93.58. A move higher from there has the potential to lift prices to $96.89, with a run at $100.63 the next major upside test. Alternatively, the market moving below $88.69 would target $84.52, with the rising 50 EMA providing a stronger bounce point.
WTI Crude Oil Outlook
WTI is coming into the new week as one of the commodities with the best fundamental profile. The Brent renaissance above $100, a tightening in crude markets globally, disciplined cuts from OPEC+ and ongoing geopolitical concerns are all providing strong underpinning for prices, even with a less than robust demand scenario.
The Fed and fresh inventory data will likely drive price action over the next seven days, but barring a significant thawing of the Middle East situation, we would expect WTI to enter August with plenty of geopolitical risk embedded in the price structure.
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