Oil prices fell more than 2% on August 13 as weakening demand expectations and a sharp increase in U.S. crude inventories outweighed renewed concerns about supply disruptions in the Middle East. The decline reversed a week-long rally, although prices remained volatile as investors assessed conflicting developments surrounding Iran, the Strait of Hormuz and attacks on regional energy infrastructure.

Brent and WTI Reverse Week-Long Rally

Brent crude futures settled 2.15% lower at $87.07 a barrel, ending a six-session advance. U.S. West Texas Intermediate crude declined 2.4% to $81.25 a barrel, following five consecutive sessions of gains.

Both benchmarks had fallen more than 3.5% earlier in the session before recovering some of their losses. The volatility reflected competing forces in the market: concerns about disruptions to Middle Eastern supply supported prices, while evidence of weaker demand and rising inventories pushed them lower.

The retreat illustrates the increasingly complicated balance facing the oil market. Geopolitical risks can generate sudden upward pressure on crude, but sustained price gains require sufficient underlying demand to absorb available supply. The latest session showed that investors were placing greater emphasis on the demand side of that equation.

U.S. Crude Inventories Post Sharpest Increase Since 2023

The most significant bearish signal came from U.S. inventory data. Commercial crude inventories increased by 17.4 million barrels to 424.4 million barrels in the week ended August 7, according to the U.S. Energy Information Administration. It was the largest weekly increase since January 2023 and lifted inventories to their highest level since June 5.

The buildup was particularly notable because U.S. crude exports declined during the period. Higher inventories can indicate that available supply is exceeding near-term demand, although weekly changes can also reflect fluctuations in exports, refinery activity and imports.

For global oil markets, the inventory increase provides a tangible indication that supply-demand conditions may be loosening in at least one major consuming market. If similar trends emerge elsewhere, pressure on crude prices could intensify even if geopolitical risks remain elevated.

OPEC and IEA Cut Demand Forecasts

The inventory data came alongside increasingly cautious assessments from major energy agencies. OPEC lowered its 2026 global oil-demand growth forecast to 580,000 barrels per day, marking another downward revision.

The International Energy Agency was considerably more pessimistic, forecasting that global oil consumption will contract by 1.6 million barrels per day in 2026, compared with a decline of 1 million barrels per day in its previous forecast. The IEA attributed the weaker outlook to higher prices and supply restrictions associated with the U.S.-Israeli war with Iran.

The gap between the OPEC and IEA forecasts highlights the uncertainty surrounding the global energy market. While the two organizations differ significantly in their assessment of demand, both have moved toward a weaker consumption outlook, creating an important counterweight to geopolitical supply concerns.

Middle East Risks Keep Oil Volatility Elevated

Supply risks have not disappeared. Yemen’s Houthi-run Saba news agency reported that the group attacked a Saudi Aramco refinery in Jazan with two drones. The refinery has capacity to produce 250,000 barrels per day of ultra-low-sulfur diesel, although Saudi Arabia had not immediately commented on the report.

Meanwhile, the United States and Iran made competing claims over control of the Strait of Hormuz, a critical energy corridor through which approximately 20% of global oil supply passed before the Iran war. Shipping activity has also fallen sharply, adding uncertainty over the volume of crude and petroleum products moving through the waterway.

Looking ahead, oil markets will remain highly sensitive to the interaction between weakening demand expectations and Middle Eastern supply disruptions. Investors will monitor U.S. inventory trends, subsequent OPEC and IEA forecasts, shipping activity through the Strait of Hormuz and developments affecting regional refineries. A sustained buildup in inventories and further demand downgrades could keep pressure on crude prices, while any major disruption to production or transportation could quickly reverse the decline and restore a significant geopolitical risk premium.