Oil Prices Tumble 12% as Geopolitical Risk Recedes and Supply Signals Shift

Global oil prices fell sharply this week, with Brent crude and West Texas Intermediate (WTI) both registering losses of around 12% — their steepest weekly decline since March 2023. As reported by MRT, Brent ended the week at $67.77 per barrel, while WTI settled at $65.52, with a modest rebound on Friday after intraday losses linked to rumors of an OPEC+ output hike.

The drop followed the announcement of a ceasefire between Israel and Iran and signals from OPEC+ of a potential production increase of over 400,000 barrels per day in August — a continuation of the group’s planned output expansion for July.

Markets appear to have discounted geopolitical risk premiums and shifted focus back to fundamentals.

“Markets are recalibrating. Military tensions flared, but supply stayed constant… Risk is being repriced,” wrote Saira Malik, Chief Investment Officer at Nuveen, commenting on investor sentiment following the ceasefire.

Phil Rosen added:

“Oil prices are collapsing and violating the uptrend they had maintained since the start of the year… dropping like they did during the pandemic and 2008 crisis.”

Global Inventory and Supply Dynamics

In Europe, middle distillate inventories at the Amsterdam-Rotterdam-Antwerp (ARA) hub fell by over 860,000 barrels — an 8% decline — marking the lowest level in more than a year, according to ING’s Commodities Desk.

Singapore also reported a drop in middle distillates, driven by higher export volumes week-on-week. The tightness in refined product markets suggests a constrained supply of diesel and jet fuel, which may temper further declines in crude benchmarks. At the same time, the market is preparing for an OPEC+ production increase of over 400,000 barrels per day in August, on top of scheduled July additions.

Drilling Activity: U.S. Signals Softening Output

According to Baker Hughes data published via MRT, the U.S. oil and gas rig count fell for a fourth consecutive month, dropping by six rigs to 432 — the lowest level since October 2021. While U.S. production remains strong overall, the continued decline in rig counts hints at a more cautious stance from shale producers.

Summary

Oil markets this week reflected a dramatic shift in sentiment: with Middle East tensions easing, and supply signals from OPEC+ and product inventories tightening, prices corrected sharply. Analysts suggest this is part of a wider recalibration, as markets turn away from short-term political shocks and refocus on structural supply and demand dynamics.