Brent crude fell 3.32 percent to $86.03 a barrel by 3:10 p.m. WAT on Thursday, extending the previous session’s decline as a sharp build in US crude inventories, easing concerns around the Strait of Hormuz and fears of weaker global demand weighed on prices.
West Texas Intermediate crude also declined 3.48 percent to $80.37 a barrel, as the retreat in geopolitical risk premiums combined with a stronger US dollar and reduced bullish positions to push both benchmarks lower.
The latest sell-off followed a surprise surge in US commercial crude inventories, which increased by 17.42 million barrels in the latest weekly data from the US Department of Energy. The build was significantly above market expectations for a decline of about 1.4 million barrels and marked the largest weekly increase since January 2023.
The inventory increase was driven largely by a sharp rise in crude imports and weaker exports. US crude imports increased by more than 1 million barrels per day, reaching their highest level since November 2024, as Saudi supplies returned, Canadian deliveries increased and Venezuelan imports climbed to their highest level in nine years.
At the same time, US crude exports declined, contributing to the unusually large accumulation. About 14.7 million barrels of the total increase was recorded along the Gulf Coast.
The build in crude stocks came despite continued withdrawals from the US Strategic Petroleum Reserve, with another 6.1 million barrels released during the week. The latest drawdown pushed the reserve below 300 million barrels for the first time since the 1980s.
Gasoline inventories fell by 970,000 barrels, although the decline was smaller than the expected 1.6 million barrels, while distillate stocks were virtually unchanged, falling by only 10,000 barrels.
The combination of rising commercial inventories and continued releases from strategic reserves has eased some concerns about near-term supply tightness, particularly as the market continues to assess developments around the Strait of Hormuz.
Oil production also increased among members covered by the OPEC+ agreement in July, with output rising by 1.37 million barrels per day to 28.92 million barrels per day. Despite the increase, production remained 6.91 million barrels per day below the group’s designated quotas.
Across the wider Declaration of Cooperation group, which includes the UAE, output rose by 1.42 million barrels per day to 37.655 million barrels per day.
Saudi Arabia accounted for part of the increase, with production rising by 590,000 barrels per day to 7.35 million barrels per day. Iraq added 665,000 barrels per day to reach 2.62 million barrels per day, while Kuwait increased output by 393,000 barrels per day to 1.85 million barrels per day.
Iran’s production rose marginally by 26,000 barrels per day to 2.478 million barrels per day. Although it marked the second consecutive monthly increase, output remained roughly 700,000 barrels per day below its pre-war level of about 3.2 million barrels per day.
Iranian exports, however, increased to nearly 1 million barrels per day in July, despite the disruption to regional energy flows.
The International Energy Agency has meanwhile lowered its forecast for global oil demand growth in 2026 to 1.6 million barrels per day from its earlier estimate of 1 million barrels per day, citing elevated fuel prices and logistical disruptions.
The agency still expects the market to record a deficit of about 1.8 million barrels per day in the third quarter because of the Strait of Hormuz disruption. For 2027, however, the IEA expects demand growth of 2.4 million barrels per day against supply growth of 8.3 million barrels per day.
The US Energy Information Administration expects Brent to average $87 a barrel in 2026, compared with $69 a barrel in 2025, while US crude production is projected to remain around 13.8 million barrels per day.
Despite Thursday’s decline, the $90-per-barrel level remains a key resistance point for Brent. Continued easing of geopolitical tensions could expose the benchmark to another test of $85, while a reversal in the current downward trend could push prices towards the $92-$95 range and potentially back towards $98-$100.
The latest movement leaves the market caught between two competing forces: substantial inventory accumulation and weaker demand expectations on one side, and the continuing uncertainty around the Strait of Hormuz and Middle East supply flows on the other.