1. Market Overview: Oil Prices Hit Three-Month Highs
As of the Asian session on July 28, 2026, international crude oil prices continued their strong performance. The front-month Brent crude futures contract was at $85.32/bbl, up 0.9% intraday; WTI crude futures were at $82.15/bbl, up 1.1%. Both benchmark prices hit their highest levels since late April 2026, with weekly gains exceeding 3%.
This rally was driven by multiple factors: rising geopolitical risk premium in the Middle East, OPEC+ maintaining tight production policies, the US summer driving season boosting gasoline demand, and global crude inventories falling for five consecutive weeks. Market sentiment has gradually recovered from June's pessimism, with speculative long positions rising significantly.
2. Geopolitics: Middle East Tensions Raise Risk Premium
Escalating tensions in the Middle East this week became the core driver of higher oil prices. According to Reuters, friction between Iran and Israel on the Syria border intensified, and the safety of tanker traffic near the Strait of Hormuz drew international attention. The US military announced the deployment of an additional destroyer to the region, fueling concerns about supply disruptions.
A senior analyst at Rystad Energy said: "The geopolitical risk premium is currently around $5-7 per barrel, up from $2-3 in June. Any substantial conflict would quickly push oil prices higher, especially given limited OPEC spare capacity." In addition, Yemen's Houthi group announced expanding its attack range on Red Sea merchant vessels, further threatening global shipping safety.
3. OPEC+ Dynamics: Sticking to Cuts, Internal Divergence
OPEC+ sources revealed that the alliance reiterated at an internal meeting on July 27 that it would continue the current production cut plan, cutting 2.2 million barrels per day until the end of Q3 2026. However, the dispute between the UAE and Saudi Arabia over production baselines resurfaced. The UAE advocates raising its baseline to reflect its capacity expansion in recent years, while Saudi Arabia insists on maintaining the existing quota framework.
While this divergence has not yet led to a policy shift, it raises questions about OPEC+'s long-term unity. Goldman Sachs' commodities research team noted: "OPEC+'s continued tight stance is key to supporting oil prices, but if internal fissures widen, it could force early production increases next year. We expect Brent to average $86 in Q3 and fall to $83 in Q4."
Notably, Russia's crude oil exports fell 8% month-on-month in July, with refinery maintenance and rising domestic demand reducing supply to Asia. This provided Saudi Arabia and others with more market share, partly offsetting the impact of non-OPEC supply growth (e.g., US shale oil).
4. Supply & Demand Fundamentals: Inventory Draws and Demand Resilience
The latest data from the US Energy Information Administration (EIA) showed that for the week ending July 21, US commercial crude inventories fell by 4.5 million barrels to 421 million barrels, declining for the fifth straight week, exceeding market expectations of a 2.5 million barrel draw. Gasoline inventories fell by 1.2 million barrels, and distillate inventories by 0.8 million barrels. Cushing inventories dropped to a four-year low, supporting WTI front-month futures strength.
On the demand side, the US summer driving season was strong, with four-week average gasoline demand reaching 9.4 million bpd, up 2.5% year-on-year. Meanwhile, China's July manufacturing PMI preliminary reading rebounded to 51.2, indicating that stimulus measures are taking effect and improving industrial oil demand prospects. Oil imports by India and Southeast Asian countries also kept growing, prompting an upward revision of global oil demand estimates by 100,000 bpd to 103.5 million bpd.
However, the market is not without concerns. Economic data in Europe is weak, with Germany's July IFO business climate index falling to 88.6 and manufacturing continuing to contract, which may dampen diesel demand. Additionally, the Fed's July meeting is approaching; the market expects a 25-basis-point rate cut with 65% probability, but if inflation surprises to the upside, hawkish rhetoric could weigh on risky assets.
5. Institutional Views & Outlook
Major institutions have diverging views on oil prices for the second half of the year:
- Citigroup: Bullish on Q3, with a Brent target of $88, citing OPEC+ cuts and seasonal demand synergy. But Q4 risks are skewed to the downside due to non-OPEC production increases and possible OPEC+ easing.
- Morgan Stanley: Expects Brent to trade in an $80-90 range, with geopolitics and inventory changes driving short-term moves, but slowing long-term demand growth capping upside.
- UBS: Maintains overweight on energy, believing current oil prices do not fully reflect supply disruption risks, advising investors to hold upstream exploration stocks.
Technically, the daily MACD histogram for Brent crude is expanding and above the zero line, with RSI at 68, near overbought territory but without divergence. Key resistance lies at $86.50 (May high); a break could challenge the $90 psychological level. Support is near $82 (20-day moving average).
Overall, the global oil market is in a window of multiple positive factors, with short-term trends favoring strength. However, investors should be cautious of potential risks such as widening OPEC+ internal divisions, deteriorating economic data, and Fed policy shifts. It is advisable to closely monitor the OPEC+ ministerial meeting on August 3 and US employment data to adjust positions.
(This article is compiled from Thailand PTT Investment News for reference only and does not constitute investment advice. Investments carry risks. Please act with caution.)
