WTI Crude Forecast: Risk premium fades, supply pressures mount, bearish trend ahead

[Redator]

The geopolitical risk premium in the oil market has faded, taking a back seat after a four-week, 30% parabolic rally in West Texas Oil CFD (a proxy for WTI crude futures) during the initial phase of the Israel-Iran conflict.

Key takeaways

• Oil’s geopolitical risk premium has subsided after a 30% rally during the Israel-Iran conflict, with West Texas Oil CFD plunging 18% from its 23 June 2025 high.
• US crude oil inventory drawdowns have slowed, signalling potential stock build-ups that could further weigh on WTI prices.
• Possible easing of US sanctions on Russian oil, combined with OPEC+’s planned output hike, may add downward pressure on crude prices.
• West Texas Oil CFD has broken below key moving averages and trend supports, signalling the end of its three-month rebound and pointing to a medium-term bearish phase unless it breaks above US$68.80.

US crude oil inventories are building up again

Fig. 1: EIA US crude oil inventories excluding SPR (y/y change) with WTI crude oil futures as of 1 Aug 2025 (Source: MacroMicro)

The growth of US crude oil inventories excluding the Strategic Petroleum Reserve (SPR) on a year-on-year basis has an indirect correlation with the movement of WTI crude oil, as a build-up in oil inventories puts downside pressure on oil prices.

Since 20 June 2025, the drawn down of US crude oil inventories (excluding SPR) has slowed down from -9.9% y/y to -1.3% y/y as of 1 August 2025 based on data from the US Energy Information Administration (EIA) which suggests a potential build-up in oil inventories which is likely to put further downside pressure on the prices of WTI crude oil (see Fig. 1).

A possible reduction of US sanctions on Russian oil

Recent media reports have highlighted that the Russian government confirmed that Presidents Putin and Trump will meet for summit talks on ending the war in Ukraine in the next few days.

Hence, a ceasefire deal between Russia and Ukraine is likely to allow the removal or reduction of sanctions on Russia’s oil exports, in turn, increasing oil supply on top of ongoing OPEC+ production hikes where the cartel has agreed to pump an extra 2.5 million barrels of oil per day starting in September.

The net effect is a more dampening effect on the prices of WTI crude oil.

The three-month corrective rebound in WTI crude oil may have ended

Fig. 2: West Texas Oil CFD medium-term trend as of 8 Aug 2025 (Source: TradingView, click to enlarge chart)

The West Texas Oil CFD has broken below its 20-day, 50-day, and 200-day moving averages. In addition, its daily MACD trend indicator has broken below a former parallel ascending support from 6 May 2025 and continued to trend downwards below its centreline.

These observations suggest that a three-month corrective rebound from the 9 April 2025 low to the 23 June 2025 high is likely to have ended. The next possible movement of the West Texas Oil CFD is likely a medium-term (multi-week) impulsive bearish down move within a major downtrend phase in place since the 28 September 2023 high (see Fig. 2).

Bearish bias below US$67.25/68.80 key medium-term pivotal resistance for the next supports to come in at US$60.55, US$55.00, and US$50.50/49.10 (congestion area of 5 June/7 Aug 2017 & Fibonacci extension).

However, a clearance above US$68.80 invalidates the bearish scenario for a squeeze up to retest the next medium-term resistances at US$71.30 and US$74.00.

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