WTI crude oil suffered its largest single-day decline in three weeks, falling below $70/bbl as demand-side concerns resurfaced. The China Manufacturing PMI slipped to 49.5 in June, below the 50-mark for the first time in four months, indicating contraction in the world’s largest crude importer.
US weekly crude inventories data added to the bearish sentiment. The EIA reported a larger-than-expected build of 3.8 million barrels for the week ending June 20, compared to analysts’ expectations of a 1.2-million-barrel draw. Gasoline inventories also rose by 1.5 million barrels as the summer driving season got off to a slow start.
OPEC+ production strategy remains the key variable. The group is scheduled to begin unwinding 2.2 million bpd of voluntary cuts in Q4 2026, but the recent price weakness is raising questions about whether the planned increase will proceed. Iraq exceeded its production quota by 180,000 bpd in May, undermining compliance.
The macro outlook is clouded by persistent inflation in the US services sector, which is keeping the Federal Reserve cautious on rate cuts. A higher-for-longer rate environment could further dampen economic activity and oil demand growth.
WTI below $70/bbl presents a buying opportunity for Q3 2026 requirements. The demand concerns are cyclical, not structural. OPEC+ is unlikely to proceed with planned supply increases at current price levels. Buyers should lock in coverage in the $68-72 range and consider adding upside protection through call spreads in case of supply disruptions.