Crude oil prices dropped sharply on Monday, falling over 6% after a temporary pause in attacks between the United States and Iran raised hopes for easing tensions in the Strait of Hormuz, a vital route for global oil shipments.
Market Movements and Supply Factors
Brent crude futures slid $6.20, or 6.4%, landing at $90.58 per barrel early Monday, while West Texas Intermediate (WTI) declined $5.80, or 6.5%, to $83.51. Both benchmarks hit their lowest point in nearly a week, reversing a three-week upward streak. Just last week, Brent had surged above $100 amid disruptions to Middle East oil exports caused by ongoing attacks.
Iran stated it would maintain its ceasefire as long as the US continues its bombing pause. Meanwhile, Washington confirmed it halted strikes to allow diplomacy time to work.
Despite the pause, oil flow through the Strait of Hormuz remains limited. Over the weekend, fewer than 10 commodity vessels passed daily, with only seven crossing on Sunday, reflecting caution among shipping companies. Further complicating matters, traffic through the Bab el-Mandeb Strait in the Red Sea fell to a months-long low after Houthi forces in Yemen struck Saudi oil sites in Yanbu and Jizan. Eleven vessels crossed there Sunday, including seven tankers.
The market is pricing in reduced immediate risk but remains wary another attack on energy infrastructure or tankers could swiftly revive buying pressures on oil.
Technical Trends and Inventory Data
Brent crude’s short-term trend weakened, slipping below its 50-period exponential moving average at $90.87, with its relative strength index dropping to 33.55, near oversold levels. This suggests the steep decline could slow, but prices need to climb back above $90.87 to improve the outlook. Support is seen near $85 to $86; a break lower could extend losses, while a rebound above $90 to $91 might signal renewed supply concerns.
WTI also fell below its 50-period moving average at $84.53, with an RSI of 40.57 indicating weak momentum without reaching oversold territory. Key support stands near $83; sustained trading below this may open focus on $82 and $80 levels, whereas moving back above $84.50 could ease selling pressure.
US commercial crude inventories rose by 2 million barrels to 411.7 million barrels for the week ending July 17, though stocks remain 6% below the five-year seasonal average. This slim buffer leaves the market vulnerable if supply disruptions continue.
Recent reports also highlight ongoing challenges in the region that keep traders cautious despite the pause.
