The WTI crude market in July 2025 maintained firm support within a $60–70 range following a US crude inventory draw of 3.2 million barrels week-on-week — significantly exceeding expectations. This inventory draw was not merely a supply-demand coincidence; it resulted from simultaneously rising refinery utilization rates and increased exports, and was received by the market as a signal of underlying physical demand strength.
Near the $60 level, a "support sentiment" is being cultivated. The "$60 buy" consensus that has been observed since the previous period (May) continues to be seen in July as well.
The 3.2 million barrel draw was more than three times the market expectation (~1 million barrels). The magnitude of this deviation indicates the need to read the entire supply chain — not just simple supply-demand judgment. Looking at the "breakdown" of the draw (refinery utilization, exports, imports) is as important as its "magnitude."
The most important structural change of July was the forward curve shifting from contango to backwardation. The curve that had been in a contango tendency in previous months reversed following the large inventory draw, transitioning to a state where near-month prices exceed far-month prices.
Critically, despite this shift to backwardation, there is "no overheating in the basis." The degree of backwardation is not excessive, remaining as a mild backwardation that appropriately reflects the reality of the physical market.
The phrase "backwardation without overheating" is significant. During past acute geopolitical shocks (e.g., the Russia-Ukraine invasion in 2022), backwardation was accompanied by a sharp basis surge and overheating. July's backwardation is mild, indicating the market is receiving the inventory draw not as "temporary noise" but as a "sustainable signal grounded in physical demand."
The most noteworthy feature of July's speculative positioning was the observation of an "unwinding phase" in which net positions and trader flows moved in diverging directions. Three distinct capital flows were intersecting simultaneously.
First, short-covering of tariff-driven sales: the unwinding of short positions formed in previous months due to concerns about US tariff policy progressed. Second, exploratory buying: small-scale new long position construction around the $60 price level was observed. Third, rotation into other assets: a portion of capital moved from crude oil into equities, bonds, and other assets.
In an unwinding phase where three capital flows intersect simultaneously, looking only at the "direction" of positioning leads to misreading the essence. Only by separately observing net positions (total position volume) and trader flows (individual buy/sell flows) does it become clear "what market participants are thinking as they act." In this phase, position cleanup — not directional betting — was the primary motive.
The July unwinding phase is best understood as a position cleanup phase for the buildup accumulated in previous months. With the inventory draw as a physical demand signal, the curve shifted to backwardation without overheating — interpretable as a "runway period" searching for the next directional move.