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West Texas Intermediate (WTI) crude oil extended its decline on Wednesday, retreating to levels last seen before the recent US-Iran conflict as improving crude shipments through the Strait of Hormuz eased supply concerns. Prices also came under additional pressure from expectations that OPEC+ will approve another production increase at its upcoming meeting.
WTI was trading near $68.13 per barrel, down roughly 2.6% during the session, as traders shifted their focus from geopolitical risks to the outlook for global supply.
US Crude Inventories Continue to Decline
Fresh data from the US Energy Information Administration (EIA) showed that commercial crude inventories fell by 3.775 million barrels in the week ending June 26, marking the tenth consecutive weekly decline in stockpiles. Although the continued drawdown highlights resilient demand, the decline was smaller than analysts’ expectations of a 5.1 million-barrel reduction and below the previous week’s 6.088 million-barrel draw. Even so, US crude inventories have dropped to their lowest level since September 2018.
The smaller-than-expected inventory decline provided limited support for oil prices as broader market sentiment remained focused on expanding supply.
Hormuz Traffic Recovery Reduces Geopolitical Premium
A key factor behind the latest sell-off is the steady recovery in tanker traffic through the Strait of Hormuz, one of the world’s most critical energy shipping routes.
Following last month’s interim peace agreement between the United States and Iran, crude exports have gradually normalized, prompting traders to remove much of the geopolitical risk premium that had previously supported oil prices.
However, negotiations between Washington and Tehran remain incomplete. Significant disagreements persist over inspections of Iran’s nuclear program and the future governance of the Strait of Hormuz.
Iran continues to argue that the strategic waterway falls under its sovereignty and has proposed transit fees for commercial vessels, while the United States maintains that international shipping through the strait must remain unrestricted.
OPEC+ Expected to Increase Production Again
Market pressure intensified after reports indicated that OPEC+ is likely to approve another production increase during Sunday’s ministerial meeting.
According to sources familiar with the discussions, the alliance is expected to raise its production target by approximately 188,000 barrels per day in August, matching the supply increases announced for both June and July.
Another output increase would reinforce expectations that global oil supplies will continue expanding during the second half of the year, potentially offsetting strong seasonal demand.
Supply Outlook Dominates Market Sentiment
While geopolitical developments remain an important variable for energy markets, investors are increasingly focusing on the balance between supply and demand.
Improving export flows through the Strait of Hormuz, expectations of additional OPEC+ production, and easing concerns over immediate supply disruptions have outweighed the supportive impact of declining US crude inventories.
Unless new geopolitical tensions emerge or demand strengthens more than expected, oil prices may remain under pressure as markets assess the prospect of rising global supply in the coming months.
