Oil prices dropped after hitting a two-month high. Crude oil reached $66.28 but fell back, ending 31 cents lower at $64.98 during US trading hours. The EIA noted that US oil production peaked this year but is expected to decline in 2026. However, this news did not keep prices up. Anticipation of upcoming API oil inventory data, which can affect market movements, might have led to some selling.

OPEC Supply Concerns

OPEC supply worries have eased this month. Reduced cuts have balanced out production increases. However, more production hikes are likely, possibly continuing into autumn. Without changes in US trade conditions, increased oil supply could struggle because of lower demand in a weakening economy. The initial rise above $66.00 wasn’t sustainable. The market seems to be reacting more to future supply and demand expectations than to immediate price changes. The pullback after the brief high indicates that traders are hesitant to chase higher prices without solid support from changing fundamentals. Recent production data confirmed that the US likely reached its highest output level for the year. The Energy Information Administration predicts a decline in 2026, but this news failed to maintain bullish momentum in crude, as the market quickly digested the information. As anticipated, focus shifted to the upcoming inventory figures from the American Petroleum Institute. These private stock levels usually trigger short-term adjustments. Many traders likely expect that high supply data could drive prices down, especially after strong production numbers and potential inventory increases weigh on the market.

Impact Of Trade Activity

The Organisation continues to influence market expectations. This month, changes in supply from OPEC have not caused significant concern because cuts from certain members have balanced out increases in others. There seems to be a consensus that additional production could happen and may continue at least until September. This isn’t just speculation—future pricing has already started reflecting this scenario. We are also monitoring broader trade activity. If US trade flows remain steady, there may be limits on further oil supply expansion, as immediate consumption could become a bottleneck. Recent data indicates a slowdown in the overall economy, meaning demand won’t ramp up during these times. This is what led to some downward pressure in recent trading sessions. In the coming days, it will be important to pay attention to inventory timings. Storage reports often trigger market movements, especially when volumes are sensitive to production levels. Short-term contracts might experience unpredictable shifts. Increased volatility following API or EIA reports can create brief but useful opportunities. Price targets are not being defended as strongly in this environment. We have observed less engagement from CTAs and macro funds near recent highs. Traders should consider adjusting their positions and widening their stop-loss levels due to the possibility of sudden changes, even from mild news. Liquidity remains adequate, but depth might disappear quickly outside normal trading hours. Pay attention to how Brent reacts near key psychological price levels, especially if WTI approaches $64.50. This might provide insight into where hedging might occur. Additionally, keep an eye on long-dollar positions. If the economic slowdown worsens, rebalancing in currencies could lead to quicker shifts in commodity positioning than anticipated. Short-coverings are common this time of year, especially before storage data is released. If we see weak volume during price increases, it would suggest that accumulation is still cautious. It’s usually better to trade against strength that hasn’t been sustained over a few sessions. Create your live VT Markets account and start trading now.

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