WTI crude faces 24% chance of sliding to $60 in July as supply fears ease

Traders on the Polymarket prediction platform see a near one-in-four chance that West Texas Intermediate crude falls to $60 a barrel this month, a level not touched since before the Iran war erupted in late February.

The swift recovery of oil flows through the Strait of Hormuz following a US-Iran interim agreement has flipped the market from a historic supply deficit to an emerging surplus, sending WTI crude toward pre-conflict levels. Brent futures traded at $70.66 a barrel Thursday, down 1.3 percent, while WTI fell 1.5 percent to $67.54 — both marking their lowest since late February, just before US and Israeli airstrikes on Iran began.

"Lower geopolitical risk and the quick rebound in flows have led to a steeper price decline than we had expected," Henri Patricot, an analyst at UBS, said in a note Wednesday. The bank cut its 2026 Brent forecast by $9 to $84 a barrel and its 2027 estimate by $10 to $75, while WTI projections fell to $79 and $71, respectively.

The Polymarket odds reflect a growing conviction that the supply overhang Wall Street predicted at the start of 2026 — before the war sent Brent above $126 — is now reasserting itself. The International Energy Agency estimates the market could shift into a surplus of 2.9 million barrels a day by the fourth quarter, widening to 3.8 million barrels a day in 2027.

Hormuz flows recover faster than expected

Oil transits through the Strait of Hormuz have recovered to about 50 percent of pre-conflict levels since the June 17 memorandum of understanding between Washington and Tehran, according to UBS. UAE exports have returned to nearly 85 percent of normal, benefiting from bypass routes, while Saudi exports remain 25 percent below pre-conflict levels though June volumes rose about 10 percent from May. At least five supertankers carrying a total of 10 million barrels of Saudi oil have exited the Strait from Ras Tanura, with Saudi Aramco switching to spot pricing to speed sales in Asia, trade sources and shipping data show.

The last time oil prices collapsed this rapidly after a major geopolitical disruption was in 1991, when Brent fell from $36 to $18 within four months of the Gulf War ceasefire as Kuwaiti and Iraqi production returned to market. The current decline — from a peak above $126 in March to below $71 in early July — represents a roughly 44 percent drop over a similar timeframe.

Demand weakness compounds the supply glut

China's role as a swing buyer has added downward pressure. The country's crude imports fell sharply to 6 million barrels a day in June, well below the typical 10 million to 11 million range, as the world's largest crude importer slowed purchases after stockpiling heavily through 2025. HSBC analysts expect the market "to absorb returning Middle East barrels through gradual restocking, alongside the end of IEA strategic stock releases in July," adding that Brent could move back toward $80 a barrel or higher once the near-term mini-glut fades.

UBS flagged two-sided risks to the outlook. On the upside, a breakdown of the MoU could push prices back toward $100 a barrel, with a spike to $120 or more possible if major oil infrastructure is targeted. Conversely, a faster ramp-up in flows combined with increased production from the UAE and Iran "could send Brent back below $70 a barrel," with a scenario incorporating greater Venezuelan output recovery potentially pushing prices to $60 or below.

The next round of US-Iran negotiations is scheduled after July 9 funeral processions for Iran's late Supreme Leader Ayatollah Ali Khamenei, Qatar's Foreign Ministry said Thursday. The outcome of those talks will determine whether the current bearish momentum accelerates or reverses.

This article is for informational purposes only and does not constitute investment advice.