IEA's "Supply Glut" Forecast Upended, Strong Technical Support Emerges for Oil Prices

Summary:

Amid renewed escalation of US-Iran hostilities on July 7-8, the International Energy Agency (IEA) warned its projection of a significant 2026 oil market supply glut could be overturned. Though the June reopening of the Strait of Hormuz boosted supply, total global output remains far below pre-conflict levels. Technically, WTI crude has found robust support near the uptrend line connecting late-June lows, with moving average golden cross and momentum indicators bouncing off lows, setting up near-term bulls for a rally.

BUY WTI

EXP

PENDING

70.000

Entry Price

95.800

63.800

71.415 -0.230 -0.32%

Pips

PENDING

63.800

Exit Price

70.000

Entry Price

95.800

‌Fundamentals‌

The IEA stated Friday that recent US-Iran hostility escalation could upend its forecast of a major 2026 oil supply glut. Global supply surged after the Strait of Hormuz reopened in June, but still lags pre-conflict levels. Last month, a US-Iran peace deal reopened the strait, offering the global oil market temporary relief. Historically, a full shutdown of this chokepoint cut crude flows by up to 14 million barrels per day during peak oil supply crises.

The IEA noted global oil supply rose by 4.1 million b/d in June, yet remains 9.4 million b/d below pre-conflict levels.

This latest IEA update signals major "expectation reversal" risks in the global oil market: the June US-Iran peace deal and 4.1 million b/d supply surge had reinforced the IEA's earlier glut outlook, but renewed US-Iran tensions on July 7-8 quickly clouded this optimistic view.

With global supply still 9.4 million b/d below pre-conflict levels, and the planned 7.5 million b/d 2026 output hike fully dependent on unobstructed strait traffic, a renewed threat of a full strait shutdown would erase the slim projected surplus, overturn the supply glut forecast, and trigger fresh geopolitical risk premiums to drive oil prices sharply higher.

‌Technicals‌

WTI crude currently holds above the uptrend line linking late-June lows. After a strong rebound from near $69.00 to a high of $76.75, oil pulled back in recent sessions, forming a precise bottom during consolidation that attracts dip-buyers to the uptrend line.

On the daily chart, the 100-day moving average has successfully crossed above the 200-day moving average, confirming a medium-to-long term bullish alignment. With prices firmly above both MAs, these two lines and the uptrend line create multi-factor resonance, offering solid dynamic support for near-term pullbacks.

The Stochastic oscillator, after deep oversold readings, has turned sharply higher, signaling the near-term correction is nearly over and bullish momentum is accelerating. The RSI has also bounced off lows, with both indicators well below overbought levels, leaving ample room for sustained upside if buying pressure persists.

‌Trading Recommendation‌

Direction: Buy

Entry: 70.00

Target: 95.80

Stop-Loss: 63.80

Expiry: 2026-08-09 23:55

Supports: 68.46, 67.22, 63.56

Resistances: 72.31, 75.76, 77.89

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