WTI reverses lower as huge US inventory build clashes with Hormuz supply fears

• WTI Oil reverses lower and falls 0.77% on Wednesday after approaching a nearly two-week high.
• The International Energy Agency forecasts global Oil supply to fall by 4.3 million barrels per day this year.
• A 9.1 million-barrel increase in US crude inventories weighs on prices despite escalating supply concerns.

West Texas Intermediate (WTI) US Oil reverses lower on Wednesday and trades around $81.60 at the time of writing, down 0.77% on the day. Oil prices erase part of their recent gains as a sharp increase in US crude inventories offsets mounting concerns about global supply, with the Strait of Hormuz remaining at the center of tensions between the United States (US) and Iran.

US President Donald Trump says the situation with Iran is “going fine” and claims that US forces are in “total control” of the Strait of Hormuz. However, Tehran maintains that the strategic waterway will remain closed until its conditions are met. Iran Supreme National Security Council Secretary Mohsen Rezaei says these demands include an end to the US war and blockade, the release of frozen Iranian assets and a regional ceasefire.

Tensions remain elevated after US forces disabled a Panama-flagged cargo ship attempting to sail toward an Iranian port. According to reports, US forces fired two Hellfire missiles at the vessel's steering gear after it ignored warnings, highlighting the persistent risk of further escalation around one of the world's most important energy shipping routes.

Diplomatic efforts nevertheless continue. Pakistani Interior Minister Mohsin Naqvi has traveled to Tehran for talks with Iranian officials as part of mediation efforts aimed at ending the conflict and reopening the Strait of Hormuz. Pakistan has also described the 14-point memorandum of understanding brokered with Qatar in June as a potential “template of peace,” even though the agreement unraveled only days after it was signed.

The prolonged disruption is increasingly affecting the global Oil market. The International Energy Agency (IEA) now forecasts global Oil supply to decline by 4.3 million barrels per day (bpd), or around 4%, this year to 102.02 million bpd. This represents a larger contraction than the 3.7 million bpd decline projected in July, reflecting supply losses from the Middle East and Russia and the continued absence of an agreement allowing unrestricted shipping through the Strait of Hormuz and the Bab al-Mandeb Strait.

The IEA also warns that global Oil inventories fell by 2.2 million bpd last month, pushing total stocks below 7.9 billion barrels for the first time since April 2025. The agency now expects the global Oil market to record a deficit of 1.8 million bpd in the third quarter, more than twice its July estimate. Rapidly declining inventories are increasing the urgency of reopening the Strait of Hormuz and reducing the buffer available to absorb further supply disruptions.

However, weakening demand provides a counterweight to these bullish supply dynamics. The IEA forecasts global Oil demand to decline by 1.6 million bpd this year, around 47% more than projected in July, as higher fuel prices and supply constraints weigh on consumption.

In the short term, US inventory data also pressures WTI prices. The American Petroleum Institute (API) reports that US weekly crude Oil inventories surged by 9.072 million barrels last week, compared with market expectations for a 0.5 million-barrel decline. The increase, the largest since February, helps explain Wednesday's reversal despite an increasingly tight global supply outlook.

Middle East risks linger as markets focus on more upbeat narratives

Analysts at Rabobank observe that “yesterday saw the regular schtick where the Middle East situation remains worrying, but markets reacted to more positive narratives.” They highlight a backdrop of escalating tensions, noting that “after four crew and two rescuers were killed in a Houthi Red Sea attack on a ship and the US struck another in the Gulf of Oman trying to break its Iran blockade; Iran said Hormuz will stay closed unless the US meets its over-reach conditions.” Against this, political rhetoric has intensified, with Rabobank pointing out that “Trump doubled down on economic warfare vs Tehran because he thinks it’s ‘bleeding badly’ – with the other option still being to ‘hit them really hard’.”

Yet, the bank underscores that Iran “is defying US pressure by becoming a ‘survival economy’,” as reported by the Wall Street Journal, while “Pakistan claimed a US-Iran deal is close, and US Energy Secretary Wright said far more oil is flowing through Hormuz than others estimate, suggesting the US doesn’t really need to act.” In Rabobank’s view, “this routine will likely continue through to the US midterms – and then we will see what happens,” implying that markets may have to navigate this uneasy balance between persistent geopolitical risk and a tendency to latch onto more constructive narratives for some time yet.

WTI US Oil technical analysis

In the one-hour chart, WTI US Oil trades at $81.71. The near-term bias remains bullish as price holds comfortably above the 100-period simple moving average (SMA) at $78.73 and the 200-period SMA at $78.76, reinforcing a supportive underlying trend. However, momentum has cooled, with the Relative Strength Index (RSI) easing to around 46, hinting that the recent strong rally is consolidating rather than extending aggressively for now.

On the downside, initial support aligns near $80.00, ahead of a broader structural floor defined by the clustered 200-period and 100-period SMAs around $78.76–$78.73, and then the horizontal level at $77.50. Below that, deeper demand is seen at $73.51. On the topside, immediate resistance emerges at $84.50, with a subsequent barrier at $86.62, where a break higher would reopen the path toward further gains in the recovery sequence.

(The technical analysis of this story was written with the help of an AI tool. Know more.)