Three structural realities, namely an unfilled inventory hole, an unfinished peace deal, and a fractured OPEC, argue that crude's floor sits well above where it traded before the war began.
The West Texas Intermediate (WTI) crude futures contract struggled to break above the $96 resistance area in early June and has since retreated sharply. The decline has been fueled by a steady stream of headlines, and even rumors, suggesting a potential agreement to end the nearly 3-½ months old U.S.-Iran war, each of which has weighed on prices.
Since the start of June, the benchmark CL contract has fallen about 15%, though it remains nearly 11% above its prewar level. The key question now is whether the war premium that had been built into crude prices amid fears of supply disruptions is beginning to unwind.
WTI retreats as war premium fades
Source: TradingView
Further evidence of the depth of the weakness is the absence of a classic "buy the rumor, sell the news" reaction. Crude prices fell again on Thursday even after the warring sides confirmed the electronic signing of a Memorandum of Understanding (MoU).
Some of the weakness is attributable to tempering China demand for the commodity. LPL Chief Economist Jeffrey Roach pointed to Vortexa data, which showed Chinese crude imports by tanker fell to 6.7 million barrels a day (mb/d) last month, nearly 40% below the 2025 average.
Not everyone is buying the secular-bearish narrative. OPEC continues to project robust growth in global oil demand through 2050, arguing that energy security concerns and rising consumption in emerging economies will keep crude demand on an upward trajectory.
Investment firm BNP Paribas predicts that the de-escalation would nudge Brent crude oil prices back toward roughly $80 per barrel. The firm expects oil prices to stay within the $80–$90 range over the coming months, basing its forecast on oil-producing countries outside the Persian Gulf increasing production, less power for OPEC following UAE’s exit from the group, potential structural demand destruction and likely removal of sanctions on Iran.
Why Oil Will Hold Its Ground
The Peace Deal Is a Framework, Not a Final Agreement
The electronically signed MoU merely opens a 60-day negotiation window. Key issues remain unresolved, and any breakdown in talks could quickly revive concerns about supply disruptions.
The Inventory Hole Is Too Deep to Fill Quickly
According to International Energy Agency’s (IEA) estimates the average pace of stock draws since the start of the Gulf conflict to 3.8 mb/d, of which 2.4 mb/d for crude and 1.4 mb/d for products. Adding complexity to the bearish case, the EIA reported a crude draw of 8.263 million barrels for the week of June 12, more than double the 3.6 million forecast. This is a signal of physical tightness that sits uneasily alongside the diplomatic selling pressure.
Minneapolis Fed economist Neil Mehrotra notes that even if the Strait of Hormuz opens shortly, the hole in inventories has to be refilled. Therefore, he expects prices to remain elevated for some time.
The IEA also expects a gradual recovery in production and exports from the Gulf if the peace deal holds. The resumption of oil exports from Iran will hinge on the U.S. lifting sanctions. ING Commodity Strategists Ewa Manthey and Warren Patterson expect uncertainty to persist regarding how quickly flows can normalise, with ramp-up timelines dependent on operational, logistical and sanction-related adjustments.
Physical barrels cannot return to market at the speed that diplomatic signals travel. That gap keeps a floor under prices regardless of what the peace deal says on paper.
OPEC's Architecture Is Broken — and That Cuts Both Ways
The UAE's departure from OPEC on May 1 means the cartel is likely to have a less prominent position in oil markets going forward. And OPEC production has fallen more than 30% since the start of the war. Without OPEC discipline to manage the recovery, prices face wild swings in both directions, which itself sustains a risk premium.
What the Charts Say
WTI remains in a short-term downtrend, but the $74-$76 zone is emerging as a pivotal support area where traders will determine whether this is merely a war-premium unwind or the beginning of a larger bearish leg lower.
For bulls to regain control, the commodity should Hold above $74-75, break above $80 and reclaim the $87-88 level. A move back above $87 would be the first sign that the selloff was primarily a war-premium unwind rather than the start of a deeper bear trend.
Bearish Scenario If $74 support fails, the next downside target becomes $70, with a potential extension toward $68. A deeper retracement could challenge the entire war-related rally