Global crude oil prices extended their volatile pullback on Friday, July 31. A pause in US-Iran attacks and improved tanker traffic through the Strait of Hormuz reduced the geopolitical risk premium accumulated earlier in July.
A sharp decline in US crude inventories provided some support, but it was outweighed by Middle East de-escalation, a firmer US dollar and month-end profit-taking.
Data note: Prices are intraday indications as of approximately 3:00 to 3:30 p.m. Beijing and Malaysia time. WTI refers to the active September 2026 contract, while Brent refers to the active October 2026 contract.
Market Overview
| Instrument | Intraday Price | Daily Change | Daily Range |
|---|---|---|---|
| WTI Crude Futures | Around $82.04/bbl | -1.85% | $81.21 to $84.31 |
| Brent Crude Futures | Around $85.85/bbl | -1.19% | $84.63 to $87.45 |
| Brent-WTI Spread | Around $3.81/bbl | Slightly wider | Around $3 to $4 |
| US Dollar Index | Around 100.0 | About +0.3% | Firmer dollar |
Despite the daily decline, both benchmarks remained approximately 18% above their end-June reference levels. This comparison is indicative because futures contract rollovers can affect continuous prices.
Global Market Background
1. Middle East Risk Premium Declines
Escalating US-Iran hostilities and disruptions around the Strait of Hormuz pushed Brent above $90 in July and briefly above $100.
The pause in attacks, renewed expectations of negotiations and improving tanker movements have encouraged traders to reduce extreme supply-disruption pricing. However, the Strait of Hormuz remains the oil market's largest short-term event risk.
2. US Crude Inventories Fall Sharply
For the week ending July 24, the US Energy Information Administration reported:
- Commercial crude inventories fell 7.2 million barrels to 404.5 million barrels
- Inventories were approximately 7% below the five-year seasonal average
- Refinery utilisation increased to 97.2%
- US crude production was approximately 13.796 million barrels per day
- Gasoline inventories were essentially unchanged
- Distillate inventories increased by 1.1 million barrels
The inventory draw supported prices, although total US petroleum products supplied over the previous four weeks was 2.3% below the corresponding 2025 period.
3. OPEC+ Prepares a Modest Supply Adjustment
Seven OPEC+ producers agreed to implement a production adjustment of approximately 188,000 barrels per day in August as part of the gradual unwinding of earlier voluntary cuts.
The group retained the flexibility to pause or reverse the process and is scheduled to review market conditions again on August 2.
Supply and Demand Structure
According to the International Energy Agency's July report:
- Global oil demand is forecast to decline by approximately 1 million barrels per day in 2026
- Demand is expected to recover by about 2 million barrels per day in 2027
- Global supply rebounded by 4.1 million barrels per day in June to 98.8 million barrels per day
- Supply remained around 9.4 million barrels per day below pre-war levels
- Gulf oil exports recovered to 16.1 million barrels per day
- Pre-war Gulf exports averaged approximately 24 million barrels per day
The market therefore remains in a transitional phase where supply is recovering but has not fully normalised. Continued de-escalation could shift attention back toward weak demand and possible future oversupply.
Industry Impact
Upstream Producers
July's elevated average prices remain supportive for the earnings and cash flows of major producers and national oil companies.
Refiners
Product crack spreads and refining margins reached four-year highs in early July, suggesting refiners may outperform the movement in crude prices alone.
Airlines, Transportation and Petrochemicals
Oil has retreated from its highs but remains above end-June levels, keeping fuel and feedstock costs elevated.
Malaysia
Brent remains an important reference for Petronas and Malaysia's upstream industry. The domestic impact also depends on the ringgit, fuel subsidies and government pricing mechanisms.
Market Drivers
- US-Iran military and diplomatic developments
- Tanker traffic through the Strait of Hormuz
- US inventories and refinery utilisation
- OPEC+ production policy
- Chinese crude-import demand
- The US dollar and global interest-rate expectations
Short-Term Outlook
| Instrument | Reference Support | Reference Resistance |
|---|---|---|
| WTI Crude | $81.00 / $78.00 | $84.30 / $87.00 |
| Brent Crude | $84.50 / $82.00 | $87.50 / $90.00 |
| Brent-WTI Spread | $3.00 | $5.00 |
WTI may trade between $78 and $87 in the near term, while Brent could consolidate between $82 and $90.
Continued de-escalation and improving Hormuz traffic could push Brent toward $82. Renewed conflict could quickly return it above $90. Below-average US inventories should limit the scope for a sustained price collapse.
For market observation only; not investment advice.