Crude oil prices extended their decline on Aug. 5 as traders reduced the geopolitical risk premium tied to disrupted shipping through the Strait of Hormuz. Brent crude fell below $79 a barrel, while West Texas Intermediate traded near $75, but tight physical supplies could limit further losses.
Brent futures dropped 92 cents, or 1.2%, to $78.44 a barrel by 3:30 a.m. GMT. WTI futures declined $1.07, or 1.4%, to $74.70. Brent has fallen more than 12% this week, while WTI has lost over 11%.
Why Are Crude Oil Prices Falling Today?
Oil prices are falling because the market expects diplomatic efforts to improve Gulf shipping and reduce the threat of a prolonged supply disruption. Qatar reported progress in efforts to end the Iran conflict, although Iran disputed claims that negotiations with the United States were underway.
That uncertainty remains important. Before the conflict, around 20% of global oil and liquefied natural gas shipments passed through the Strait of Hormuz. A breakdown in diplomacy could quickly restore the supply-risk premium that supported oil earlier in the year.
WTI Crude Oil Tests $72.70 Support
The four-hour WTI chart shows strengthening bearish momentum after oil broke below the important $78.10 level.
WTI Support. Source: TradewithKrutikaa on X
WTI traded near $75.36 in the supplied chart, below several short-term moving averages. The relative strength index stood near 34, placing momentum close to oversold territory without confirming that a bottom has formed.
The first major support sits at $72.70. A breakdown below that level could expose $70.90, followed by the earlier price floor around $67.40.
WTI must recover above $78.10 to ease immediate selling pressure. Stronger resistance appears at $81.55 and $83.65. Until buyers reclaim those levels, rebounds may remain corrective rather than signal a lasting trend reversal.
Brent Sell-Off Conflicts With Tight Physical Supply
Although the headline Brent price has dropped sharply, the supplied futures-spread chart suggests that buyers still place a large premium on immediately available oil.
Brent Backwardation. Source: Lukas Ekwueme on X
The Aug. 4 chart places the difference between the front Brent contract and the six-month contract near $14.75 a barrel. This structure is called backwardation, meaning near-term oil costs more than oil scheduled for later delivery.
Strong backwardation often points to limited prompt supply. Therefore, the chart creates an important split in the crude oil outlook: financial markets are pricing in diplomatic progress, while the physical market still appears concerned about the availability of near-term barrels.
Goldman Sachs said physical oil conditions remained tight and estimated that Gulf exports had fallen to about 36% of prewar levels. The bank expected Brent to trade between $80 and $90 until a U.S.-Iran agreement or major escalation provided clearer direction.
Oil Inventory Data and OPEC+ Could Set the Next Move
Market sources citing American Petroleum Institute data reported a 2.7 million-barrel increase in U.S. crude inventories for the week ended July 31. The official Energy Information Administration report is scheduled for 10:30 a.m. ET Wednesday. A confirmed inventory build could pressure WTI, while an unexpected draw may support a rebound.
OPEC+ has also approved a September production-quota increase of about 188,000 barrels per day. However, export disruptions mean some previous quota increases have produced only limited additions to global supply.
The near-term crude oil price outlook remains bearish below $78.10 for WTI and $80 for Brent. Still, extreme backwardation and unresolved Hormuz risks mean any diplomatic setback could trigger another sharp oil-price reversal.
