Oil falls on demand downgrades and surprise 17.4m-barrel US stock build
Crude slid more than $1 as OPEC and the IEA sharply cut consumption forecasts and US inventories posted their largest weekly gain since January 2023, though stalled US-Iran talks and attacks on Gulf shipping kept a floor under prices.
Brent crude fell $1.29, or 1.5 per cent, to $87.69 a barrel by 0100 GMT on Thursday, while US West Texas Intermediate dropped $1.30, or 1.6 per cent, to $81.97. The decline followed consecutive demand downgrades from the two leading oil forecasters and an unexpectedly large swell in American stockpiles.
OPEC trimmed its world oil demand growth projection for 2026 to 580,000 barrels per day in its monthly report on Wednesday. The International Energy Agency went further, revising its forecast for consumption this year to a 1.6 million bpd contraction, up from the 1 million bpd decline it projected just a month ago. Both agencies pointed to restricted fuel supplies and elevated prices stemming from the US-Israeli war on Iran as the primary cause.
The demand-side pressure was compounded by a jarring supply signal from the United States. The Energy Information Administration reported that commercial crude inventories surged by 17.4 million barrels to 424.4 million barrels in the week ended August 7, the largest weekly build since January 2023 and the highest level since June 5. Analysts polled by Reuters had anticipated a 1.4 million-barrel draw, making the swing roughly 19 million barrels wider than consensus. The EIA attributed the jump to a slump in exports.
Geopolitical floor
Despite the bearish data, prices have not collapsed. The deadlock between Washington and Tehran continues to underpin the market. A senior Iranian source said on Wednesday that negotiations to revive the interim agreement reached in June and set a timeline for its implementation have made no progress.
The risk premium was reinforced on Tuesday by attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait, two chokepoints through which the bulk of Middle Eastern oil and gas transits. Any prolonged disruption to either route would tighten global supply at a moment when inventories are already drawing down elsewhere.
Analysts at Haitong Futures warned that the attacks are degrading market visibility. "The safety situation for navigation in these waters has further deteriorated, forcing vessels to turn off their signals, which reduces transparency in shipping and makes it more difficult for the market to track and assess actual supply levels," they said in a note.
For investors, the session underscored a market pulled in opposite directions: demand is eroding faster than anticipated, yet the geopolitical architecture that could restore supply stability remains fractured. Until either the US-Iran impasse breaks or the physical risk to Gulf shipping recedes, crude is likely to trade in a narrow, elevated range regardless of inventory data.
