West Texas Intermediate (WTI) crude Oil remains under pressure on Wednesday as improving crude flows through the Strait of Hormuz push prices back to levels seen before the US-Iran war, overshadowing the latest US inventory data. At the time of writing, WTI trades around $68.13 per barrel, down nearly 2.60% on the day.
The US Energy Information Administration (EIA) reported that commercial crude Oil inventories fell by 3.775 million barrels in the week ended June 26, marking a tenth consecutive weekly draw. However, the decline was smaller than market expectations for a 5.1 million-barrel draw and followed a 6.088 million-barrel decline in the previous week. US crude stockpiles also fell to their lowest level since September 2018.
Oil has shed much of its geopolitical risk premium as tanker traffic through the Strait of Hormuz continues to recover following last month's interim US-Iran peace agreement. However, the two sides have yet to finalize a permanent deal, with differences remaining over inspections of Iran's nuclear program and the future management of the Strait of Hormuz.
Tehran insists the strategic waterway falls under its sovereignty and wants to impose transit tolls on commercial vessels, while the United States says the waterway should stay open for free commercial shipping.
Adding to the bearish outlook, Reuters reported on Wednesday that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) are expected to approve another production increase when the group meets on Sunday.
According to three sources, the alliance is likely to raise its output target by around 188,000 barrels per day in August, matching the increases announced for June and July.
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