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Oil Posts Weekly Rise as Geopolitical Risks Offset Bearish Demand Outlook

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Global oil benchmarks logged weekly gains on Friday as persistent Middle East supply risks and Strait of Hormuz bottlenecks overshadowed bearish demand revisions.

West Texas Intermediate settled at $82.40 per barrel, up from $77.08/bbl the previous week, while Brent closed at $88.73/bbl, up from $82.35/bbl a week earlier.

The rebound broke a two-week losing streak as markets navigated a tug-of-war between enduring Middle East supply threats and mounting downward pressures from weak global demand and higher US crude stockpiles.

Supply anxieties intensified following a wave of regional security incidents.

The Abu Dhabi National Oil Company reported that two of its vessels were attacked while trying to cross the Strait of Hormuz, while Houthi drone strikes targeted Saudi Aramco's Jazan refinery on the Red Sea coast.

Furthermore, stalled diplomatic talks between the US and Iran, compounded by mutual demands for financial compensation and ongoing naval blockades, left the critical Hormuz waterway effectively restricted.

Analysts noted that while alternative bypass pipelines and modest traffic increases have helped partial flows, persistent disruptions continue to command a heavy risk premium.

"Oil prices are currently being pulled in two opposing directions: supply risks in the Middle East continue to provide support, while weakening global demand, a sharp increase in US crude inventories, and the prospect of higher OPEC+ production are exerting downward pressure," said Linh Tran, Market Analyst at XS.com

On the demand side, major energy agencies delivered sharply bearish revisions.

OPEC lowered its global oil demand growth forecast for 2026 to 600,000 barrels per day in its monthly oil market report.

Simultaneously, the International Energy Agency projected that global consumption would contract by 1.6 million barrels per day this year, a steeper drop than previously estimated as elevated prices and regional supply bottlenecks weigh heavily on usage.

Meanwhile, domestic US supply metrics added to the market's complexity.

The Energy Information Administration reported that US commercial crude inventories surged by 17.4 million barrels to 424.4 million barrels in the week ended Aug. 7, marking the largest weekly build since 2023 and driven largely by a jump in imports and a slowdown in exports.

However, analysts pointed out that steep draws in refined products such as gasoline and diesel signaled tighter global product markets.

Looking ahead, the EIA's latest Short-Term Energy Outlook expects US crude inventories to remain below the five-year low through the end of 2026.

Due to ongoing constraints in the Strait of Hormuz, the EIA forecasts Brent spot prices to average around $85/bbl in Q3 of 2026.

The US oil rig count increased by one from 454 the previous week to 455 in the week ending Aug. 14, according to data from Baker Hughes (BKR) released Friday. The US had 412 oil rigs in operation a year earlier.

The consolidated North American oil and gas rig count, a key early indicator of future production levels, increased by eight to 812 from 804 the previous week.

Money managers in the WTI crude futures and options markets maintained their net long positions in the week ended Aug. 11, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released on Friday.

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