WTI Pulls Back from Recent Highs
WTI Crude for October delivery fell $2.43, or 2.37%, on Friday to settle at $100.05 per barrel. The decline followed a 6.7% surge in the previous session that pushed prices to a three-and-a-half-month high, with short-term profit-taking exacerbating the pullback.
The immediate catalyst for the oil price drop was a pessimistic demand forecast from the International Energy Agency. High prices and constrained supply are suppressing consumption, and the IEA expects global oil demand to post its largest annual decline since the pandemic this year.
Softer Demand Doesn't Mean Loose Supply
The IEA revised down its forecast for 2026 global oil demand to a year-on-year decrease of 2.5 million barrels per day, a further cut of 940,000 bpd from last month's projection. However, ongoing delays to supply restoration due to Middle East conflicts mean the global supply drop is still expected to reach 5.7 million bpd.
The agency also raised its forecast for this year's global oil supply deficit from 1.3 million bpd to 1.7 million bpd, and postponed the timeline for the global market to return to surplus until 2027. Weaker demand and tighter supply are occurring simultaneously.
Shipping Risks Keep Risk Premium Afloat
Reports of two vessels being struck by unidentified objects near Oman served as a continued reminder that security risks remain for the Strait of Hormuz and surrounding shipping lanes. Any new disruptions to transport could quickly offset the bearish pressure from lowered demand forecasts.
Oil prices are now in a tug-of-war around $100: demand destruction caps upside potential, while the supply deficit and geopolitical risks limit downside moves. The key focus going forward will be the pace of export recovery in the Middle East, whether the IEA further downgrades its forecasts, and the support level around the $100 mark.
