WTI Crude Prices Normalize; Hormuz Politics Still Cloud the Outlook

On the downside, a confirmed diplomatic deal that removes the threat of a Hormuz closure would likely send WTI back toward $65, the level where the market traded before the risk premium emerged. Hilal said that outcome is not the base case. It remains a tail risk for longs.

Weekly U.S. inventory reports are also providing near-term direction. The Energy Information Administration has reported draws in crude stocks for several weeks, offering some support. The next scheduled OPEC+ meeting is Aug. 3, where the group will review compliance with existing production cuts. Any sign of overproduction from Iraq or Kazakhstan would pressure prices, Hilal said.

Demand concerns, particularly from China, have capped upside. The market is balancing supply risks with a mixed demand outlook. Hilal said the risk premium could re-emerge quickly if diplomatic efforts stall or if a new incident occurs in the Gulf.

WTI has traded in a $67 to $75 range since mid-June. The lower end has held on multiple tests, suggesting strong support. The upper end has resisted several breakout attempts. The compression of the risk premium from $5 to $2-$3 reflects the market's view that the immediate threat of a Hormuz closure has receded. Hilal said the residual premium accounts for the possibility of a sudden escalation.

OPEC+ has maintained production cuts of about 2 million barrels per day through 2026. The group's compliance has been uneven, with Iraq and Kazakhstan exceeding quotas. The Aug. 3 meeting will address that. Hilal said any sign of overproduction would pressure prices, while stricter enforcement could provide a floor.