WTI Sell-Off Masks Deeper Supply Warning: Analysts

The recent sell-off in West Texas Intermediate (WTI) crude oil futures may be masking a deeper supply warning that could reshape the market outlook in the coming months, according to analysts tracking inventory data and production trends.

As of mid-2025, WTI prices have dropped by roughly 8% from their April peak, yet underlying signals, such as backwardation in the futures curve and draws in U.S. commercial crude stocks, suggest the market is tighter than the headline price action implies.

The immediate pressure on WTI prices stems from macroeconomic headwinds, including weaker-than-expected manufacturing data from China and the United States, which have fueled demand concerns. However, physical market indicators tell a different story. The prompt-month WTI contract has been trading at a premium to later months, a structure known as backwardation, which typically signals near-term supply tightness.

U.S. crude inventories have declined in four of the last five weeks, with the latest draw of 3.2 million barrels reported by the Energy Information Administration (EIA) for the week ending June 6, 2025. These draws suggest that refiners are processing more crude than current production and imports can sustain, pointing to a potential supply gap.

OPEC+ has been gradually unwinding its voluntary production cuts, but the actual increase in output has been less than announced. For instance, in May 2025, the group added only 100,000 barrels per day (bpd) against a planned 411,000 bpd increase, according to secondary sources.