In the U.S., GDP growth forecasts were revised down to 1.4%, while the Fed’s cautious rate stance at 4.25-4.50% and restrained easing outlook further limited demand optimism.
This weakening demand environment left traders questioning the sustainability of any oil prices projections above the $70 mark.
Israel-Iran Ceasefire Vaporizes Geopolitical Risk Premium
A surprise ceasefire between Israel and Iran on June 24 wiped out the geopolitical risk premium, triggering a 6% single-day price drop.
The premium, estimated at $10 per barrel during peak tensions, dissolved quickly as Strait of Hormuz flows remained intact, and Iranian exports of 1.7 million bpd were unaffected.
Tanker freight rates that had spiked during the tensions normalized rapidly, demonstrating the market’s vulnerability to geopolitical unwinding, removing a key floor under prices.
Inventory Draws Fail to Lift Market Sentiment
Despite large U.S. inventory draws, including a 5.8 million barrel EIA-reported decline, oil prices remained under pressure as markets focused on the bigger oversupply narrative.
Cushing inventories dropped near operational minimums, but refinery utilization rates fell to 86% while gasoline crack spreads slipped below five-year averages, signaling weak refining margins and constrained crude intake.
Market Outlook: Persistent Oversupply Weighs on Oil Prices
Traders should expect continued bearish pressure in the near term as OPEC+ supply growth and non-OPEC+ additions led by the U.S., Brazil, Canada, and Guyana outpace tepid demand growth, ensuring inventory builds.
While hurricane season could temporarily support prices, sustained gains appear unlikely under current fundamentals.
The removal of the geopolitical premium and slowing demand in China and the U.S. further reinforce a bearish bias in oil prices forecast until a credible rebalancing catalyst emerges.
More Information in our Economic Calendar.
