Oil is no longer trading a war. It is trading a glut, and on Thursday that glut pushed WTI below $68 a barrel, its lowest since late February and a third straight losing session. Brent slid into the low $70s. The war premium that briefly took crude above $110 in April is not just gone. The market has now pushed prices back through the level where the whole crisis began, and it is looking for the bottom.
The question that used to hang over this market was how high oil could go if the Strait of Hormuz stayed shut. The question now is how much more supply the world's producers are about to add to a market that already has too much. That question gets its first answer on Saturday, when OPEC+ meets to set August output.
The Draw Nobody Wanted
Wednesday's inventory report was a small case study in how completely the story has flipped. The EIA reported that US crude stocks fell by about 3.8 million barrels last week, a bigger draw than the roughly 2.9 million the market expected, and the twelfth straight weekly draw. In a normal market that is a supportive number. Oil fell anyway.
The reason was in the same report. Gasoline stocks built by about 2.3 million barrels and distillate by about 2.5 million, both rising in the middle of what should be peak summer driving season. Products building while demand should be strongest is a soft-demand signal, and it outweighed the crude draw. More important, the market is no longer trading the weekly US snapshot at all. It is trading the wave of supply now visibly returning through Hormuz, where flows have climbed back above 10 million barrels a day with US naval support. The UAE is exporting above 3.9 million barrels a day again, Iran has shipped tens of millions of barrels since the blockade eased, and Russian seaborne exports are running at records. Against that, a 3.8-million-barrel US draw is a footnote.
The Decision That Adds to the Glut
Into that oversupplied market walks OPEC+, which meets Saturday to decide August production. The group has raised its quota by roughly 188,000 barrels a day for five straight months, unwinding the cuts it made in 2023, and the base case is that it does so again. If it keeps that pace through September, the last of those cuts is gone and the taps are fully open.
There is a live alternative. With crude in the high $60s and every major bank now forecasting a surplus, the group could pause. Morgan Stanley this week became the latest to cut its Brent view, to $75 for the rest of 2026, and flagged a potential surplus near 5 million barrels a day in 2027. A pause on Saturday would be the clearest signal yet that the producers are worried about the price. But there is no firm indication either way, and the recent posture, from a secretary general who has publicly dismissed glut warnings to an Iraq lobbying for a higher quota, has leaned toward pumping.
There is a wrinkle worth keeping in mind. With Hormuz still not fully cleared of mines, an August quota increase is partly symbolic: Gulf barrels cannot all physically reach the market yet regardless of the headline number. The decision matters less for next month's flows than as a signal of whether OPEC+ intends to defend price or defend market share as the strait reopens. Everything the group has done this year points to the latter.
The Jobs Number and the Pause in Diplomacy
The other event today is macro, not oil. The June US jobs report, pulled forward to Thursday because Friday is the observed July 4 holiday, is the week's biggest swing factor. Private payrolls from ADP already missed on Wednesday, rising 98,000 against expectations near 118,000. A soft government number would feed expectations of a Federal Reserve rate cut and a weaker dollar, both supportive for oil; a hot one would do the reverse. It is the kind of macro cross-current that can move crude more than a barrel in either direction on a quiet summer session.
The geopolitics, for once, are quiet. The US-Iran stand-down that ended last weekend's strikes has held with no new incident. Two days of indirect talks in Doha wrapped up with Qatar reporting "positive progress" on implementing the framework, though the hard questions, Iran's frozen assets and whether it charges tolls through Hormuz, remain unresolved, and the two sides still did not meet face to face. The next round waits until after the long-delayed state funeral of Iran's assassinated former supreme leader, which runs through July 9. Diplomacy is paused, the strait is reopening, and the price is following the barrels down. The only real suspense left this week is what OPEC+ decides to do about it.
This article is for informational purposes only and does not constitute financial or investment advice. Oil market conditions can change rapidly. Consult a qualified financial professional before making investment decisions.