September WTI crude oil futures are trading at $81.19 late Thursday, up $4.11, or 5.33%, for the week, according to reporting from OilPrice.com. The week's price action reflects traders rebuilding the geopolitical risk premium associated with the Strait of Hormuz after optimism about a potential diplomatic agreement evaporated, followed by bearish demand forecasts that pressured prices lower. The rally this week was not driven by new supply losses, as the supply disruption was already priced into the market.
Instead, traders initially responded to what they perceived as a path toward reopening the Strait of Hormuz. When negotiations failed to produce concrete results, with Iran maintaining its conditions and the United States raising its own demands, traders were forced to reassess their positions. This triggered short covering and brought buyers back into a market that had stripped out risk premium too aggressively.
WTI pushed above $84.00 earlier in the week, while Brent briefly moved above $90.00. However, the rally demonstrated how quickly crude can reprice when traders realize a diplomatic headline does not translate into actual shipping improvements. The Strait of Hormuz remains the central issue in crude pricing.
Before the conflict, more than 125 vessels per day moved through the waterway. Traffic has fallen dramatically to eight vessels on Tuesday, representing a one-week low. This indicates the supply system remains far below normal capacity.
Iran has stated the strait will remain restricted until Washington accepts its conditions, while U.S. demands have moved in the opposite direction. The market currently has no timetable for a deal and no reliable estimate for when Gulf flows might return to normal. Alternative shipping routes do not provide relief.
The United States and Yemen's Iran-aligned Houthis reported separate attacks on shipping in the Bab el-Mandeb and Red Sea this week. This leaves Saudi and Gulf exporters dealing with pressure on both routes. The market faces a supply disruption with no clear end date.
The rally lost momentum after the U.S. Energy Information Administration released its inventory report, which provided a significant bearish surprise. Commercial crude inventories rose 17.4 million barrels in the week ended August 7, compared with analyst expectations for a 1.4 million-barrel draw.
Stocks climbed to 424.4 million barrels, their highest level since early June. The build resulted from slowed exports and increased imports. Gasoline and distillate inventories drew, indicating the inventory build was not entirely demand-driven, but the crude build was large enough to give bears ammunition against a market carrying substantial geopolitical premium.
Weaker demand forecasts from both OPEC and the International Energy Agency further pressured prices. OPEC cut its estimate for 2026 global oil-demand growth to 580,000 barrels per day from 780,000 barrels per day in its previous forecast a month ago. The IEA was more pessimistic, now forecasting global oil demand will fall by 1.6 million barrels per day in 2026, compared with its prior forecast for a 1 million-barrel decline.
While the two agencies disagreed on whether demand rises or falls, both revised their forecasts downward. High fuel costs are beginning to suppress consumption through reduced airline flights, lower trucking activity, and slower factory operations. Technically, September WTI crude oil futures have found resistance inside a short-term retracement zone at $81.10 to $84.53.
Support is being provided by the 52-week moving average at $69.72, with the main bottom at $67.12. Major upside resistance remains at $93.50 and $95.30. The price action indicates the market may be in a "sell the rally" and "buy the dip" mode, which is typical of headline-driven trading.
The direction of crude prices in the coming week will likely be determined by trader reaction to the $77.61 to $78.31 level. A sustained move above $78.31 would signal buyer presence beyond short covering and could extend gains into the $81.21 to $84.53 retracement zone. Conversely, a sustained move below $77.61 would indicate sellers are in control, with the first support area at $75.40 to $70.70.
WTI enters the new trading week higher for the week because the Hormuz deal expected last week does not exist. Tanker traffic remains restricted, Iran and the United States have not moved toward agreement, and attacks near alternative shipping routes maintain physical supply risk. The EIA inventory build and demand revisions from OPEC and the IEA have prevented the rally from becoming a straight move higher.
Bulls have the restricted strait, depressed Gulf exports, and unresolved geopolitical tensions. Bears have a substantial U.S. crude build and official forecasts showing high oil prices are already damaging consumption. The market remains caught in a trading range as long as the conflict remains unresolved.
Source: oilprice.com