Oil Price Forecast: WTI And Brent Reprice Middle East War Risk As Hormuz Chokepoint Dominates Oil Trade

WTI (CL=F) and Brent (BZ=F) Risk Premium Back On Top Of A Heavy Market

WTI (CL=F) Reprices Geopolitical Risk Into The Mid-$60s

WTI crude futures (CL=F) have flipped from a slow grind lower into a clear upside reversal, trading around $66–67 per barrel after bouncing off a double bottom near $55.28 set in April and November last year. That structure is a classic bullish reversal and is now reinforced by a golden cross on the daily chart, with the 50-day and 200-day weighted moving averages crossing to the upside. From the December low around $55, WTI has rallied more than 20% into the current band and logged about a 5.2% weekly gain, the first weekly advance in three weeks, which confirms that short-term trend dynamics have turned higher rather than sideways. The price map is now anchored by two key levels: upside focus around the psychological $70 handle, and downside invalidation around $62. Holding above $62 keeps the golden cross valid and supports the case for tests toward $70; a break back below that zone would signal that the market is no longer willing to pay a strong risk premium and would reopen the path toward the mid-$50s, close to the earlier double bottom at $55.28

Brent (BZ=F) Holds Above $70 As Global Benchmark For Risk Premium

Brent futures (BZ=F) are trading in the low $70s, with recent levels around $71.32–71.76 per barrel, marking a six-month high and a weekly gain of roughly 5.3%. The Brent–WTI spread is sitting in the mid-single digits, a configuration that fits an environment where total supply remains comfortable but seaborne flow risk has increased sharply. Because Brent (BZ=F) is the contract most exposed to Middle East export routes and tanker flows, its ability to hold above $70 while inventories are still building underscores how much of the current move is pure risk premium rather than a clean demand story. As long as Brent stays anchored above $70, the global complex will trade as if a disruption premium needs to be retained in forward curves and options

Strait Of Hormuz Risk Puts 20–25% Of Global Flows In Play

The main reason WTI (CL=F) and Brent (BZ=F) have re-rated higher is not a sudden boom in end-user demand but a sharp repricing of potential disruption around Iran and the Strait of Hormuz. That channel is about 167 km long, just 39 km wide at its narrowest point, and is the only sea route from the Persian Gulf to open ocean. Roughly 25% of global seaborne crude and about 20% of LNG cargoes pass through it. Iran has already staged military drills and temporarily closed the strait, and is now planning joint naval exercises with Russia, while the United States has surged naval and air assets into the region. Any limited strike on Iran or miscalculated escalation that affects shipping lanes could flip the market from a surplus to an instant shortage. Some estimates suggest that even a one-day effective blockage could send prices spiking toward $120–150 per barrel as freight costs, insurance premia and rerouting pressures explode. At the same time, Iran exports roughly 1.7 million barrels per day of crude worth around $67 billion, representing close to 18% of its GDP, which means fully closing Hormuz would also inflict serious damage on its own economy. That asymmetry argues for brinkmanship and tactical pressure rather than a full shutdown, but the probability of an accident or misstep is now high enough that the market is paying for it in the form of sustained premium in CL=F and BZ=F

Global Surplus And IEA Inventory Data Still Signal An Oversupplied Market

Underneath the geopolitical narrative, the fundamental balance remains heavy. Over the past year, headline benchmarks dropped steadily until this recent rebound, while the International Energy Agency reported that observed global inventories increased by about 37 million barrels in December, pushing total 2025 stock builds to roughly 477 million barrels, or around 1.3 million barrels per day on average. That is the largest annual inventory accumulation since 2020 and confirms that supply has been running ahead of demand. Forward balances from major houses still point to sizable surpluses later this year unless there is a meaningful supply adjustment. Some projections show that without cuts, the system would require as much as 2 million barrels per day of additional reductions in 2027 to prevent another round of stock builds. Against that backdrop, the move from $55 to the mid-$60s in WTI and the break above $70 in Brent are clearly not being driven by a tight physical market. They are being driven by optionality around future availability and transport risk, layered on top of a market that is still digesting a large cushion of excess barrels

U.S. Inventory Draws, Refinery Runs And Exports Tighten Near-Term CL=F Balance

Weekly U.S. data has added an important short-term tightening impulse for CL=F. The latest report showed a draw of roughly 9 million barrels in U.S. commercial crude stocks, the largest decline since September, fueled by higher refinery utilization and stronger exports. Gulf Coast refineries have been lifting runs ahead of seasonal demand while foreign buyers pull more U.S. barrels into the Atlantic basin, a combination that directly pulls down inventories at Cushing and along the Gulf. Recent severe winter storms across the U.S. also temporarily disrupted some crude production and affected refinery operations along the Gulf Coast, adding noise and tightening spot balances further. While those outages are transitory, the effect is to overlay a short-term physical squeeze on top of the geopolitical story. That is why WTI (CL=F) can sustain levels around $66–67 even with a global surplus: local draws and export flows make near-term prompt barrels feel tighter than the headline global stocks suggest

Tariff Whiplash From Washington Adds Macro Demand Uncertainty For Oil

At the same time, the macro backdrop for oil, WTI (CL=F) and Brent (BZ=F) is being complicated by the latest shift in U.S. trade policy. The Supreme Court recently invalidated the previous global tariff framework that imposed in excess of 20% tariffs on a wide range of imported components from Asia. Almost immediately, a new flat tariff regime in the 10–15% range was announced, signaling that tariff-driven uncertainty is not going away. For crude, the impact is indirect but material. Higher tariffs tend to weigh on global manufacturing and trade, which in turn can curb oil demand through weaker freight, industrial fuel use and slower growth in emerging markets. At the same time, prolonged trade friction and higher input costs can feed inflation, which typically pushes nominal commodity prices higher. Right now this tariff whiplash is acting as a cap on the demand narrative: even as CL=F re-prices risk, the growth outlook for oil-consuming sectors remains clouded by policy uncertainty

OPEC+ Balances Market Share Ambition Against Surplus Risk

The surplus problem pushes OPEC+ toward a strategic crossroads as CL=F and BZ=F rise. There is active discussion inside the group about resuming output increases from April, reflecting pressure from members that want to capture higher prices and protect market share. However, the inventory math from 2025 and early 2026 is unambiguous: without discipline, stock builds will continue, and any geopolitical premium will be fragile. If OPEC+ opts for restraint and holds output flat or even trims barrels, the combination of Middle East risk, U.S. draws and seasonal demand could keep Brent (BZ=F) comfortably in the $70–80 range and WTI (CL=F) in the mid-$60s to low-$70s. If the alliance moves ahead with meaningful supply increases into a surplus, then any de-escalation around Iran would likely see CL=F slide back toward the low-$60s or even the high-$50s. The current price level therefore embeds not just war-risk probability, but also a non-trivial probability that Riyadh, Moscow and other producers choose continued discipline over volume growth

Fed Policy, Yields And Demand Elasticity Above $70 Per Barrel

Interest-rate policy is another structural constraint on how far oil (CL=F, BZ=F) can run before demand starts to crack. Recent Federal Reserve minutes made it clear that policymakers are comfortable holding rates high and are willing to entertain additional hikes if inflation does not ease. Higher-for-longer policy translates into tighter credit, slower capex and weaker discretionary spending over time, all of which can dampen fuel consumption. Once WTI trades from the low-$60s into the $70+ zone and Brent pushes deeper above $70, the risk of demand destruction in sensitive segments such as long-haul transport, petrochemicals and emerging-market consumption rises. That feedback loop between higher prices and softer demand is a natural brake on any attempt by CL=F and BZ=F to trend in a straight line higher purely on risk premium

Technical Structure For WTI (CL=F): Double Bottom, Golden Cross And Critical Levels

From a technical perspective, WTI crude (CL=F) has built a durable bullish structure, but with clearly defined failure points. The double bottom at $55.28 is the foundation of the entire rally. The golden cross between the 50-day and 200-day weighted moving averages confirms a medium-term trend shift, while price action remains above the daily Supertrend and key short-term moving averages. As long as CL=F continues to trade above $62, systematic strategies that track moving average crossovers will maintain a constructive stance and treat pullbacks as opportunities rather than reversals. A sustained break below $62 would flip that logic, signaling that the market is no longer prepared to pay for elevated risk, and would invite a retest of the $55–56 area. On the upside, a clean push through $70 would open the door toward the mid-$70s, but each incremental dollar higher would have to overcome both macro headwinds and growing concerns about demand elasticity

Positioning, Options And Sentiment Around Brent (BZ=F)

The behavior of derivatives around Brent (BZ=F) reinforces the story coming from spot. Options data show a clear pickup in call buying on Brent in recent sessions, with traders paying up for upside exposure in case Middle East tensions deteriorate into actual supply disruption. That skew in the options surface is typical at the onset of a risk-premium cycle, where users focus less on gradual changes in demand and more on the probability distribution around large shocks to flows. At the same time, physical desks and macro funds remain acutely aware of the 477 million-barrel stock build in 2025 and ongoing surplus signals. The combination of heavy underlying stocks and aggressive topside hedging creates a tape that can gap violently on headlines, yet remains vulnerable to sharp reversals if geopolitical newsflow cools or OPEC+ signals looser policy

Risk–Reward View On Oil (CL=F, BZ=F) From Here

Taken together, the current configuration for oil, WTI (CL=F) and Brent (BZ=F) is defined by a clash between an overfilled storage system and elevated disruption risk. Prices around $66–67 for WTI and $71–72 for Brent reflect several concrete elements. The market is dealing with global inventories that rose by about 477 million barrels in 2025, equivalent to 1.3 million barrels per day of surplus, at the same time as U.S. weekly stocks just posted a 9-million-barrel draw, refinery runs and exports are climbing, and winter storms have disrupted parts of the Gulf Coast system. The Strait of Hormuz still carries close to a quarter of global seaborne crude and roughly 20% of LNG, and the probability of miscalculation in U.S.–Iran dynamics has risen, even if both sides understand the cost of a complete closure. OPEC+ is debating whether to add barrels from April even though some projections imply that cuts of about 2 million barrels per day may be needed in 2027 to avoid another inventory wave. The Federal Reserve is signaling higher-for-longer rates, which caps the demand story, while new 10–15% tariffs out of Washington inject further growth uncertainty. On the charts, WTI (CL=F) has a double bottom at $55.28, a golden cross, and a live support band around $62, with resistance building around $70. In that context, the near-term setup favors a moderately bullish bias as long as CL=F holds above $62 and tensions around Hormuz remain unresolved, with Brent (BZ=F) likely trading in a $70–80 band and WTI (CL=F) in a $62–70 corridor. The downside risk scenario revolves around de-escalation in the Gulf, looser OPEC+ discipline and persistent macro headwinds, which would pull CL=F back toward the high-$50s. The upside risk scenario is tied to any material disruption to flows through the Strait of Hormuz, which would rapidly push WTI and Brent into much higher ranges than current levels despite today’s surplus numbers

That's TradingNEWS