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Key Summary
US WTI crude inventories fell by 1.7 million barrels from the previous week to 409.7 million barrels, representing a roughly 6% drop compared to the five-year average.
With the recent de facto termination of the US-Iran memorandum of understanding (MOU) on maritime transit in the Strait of Hormuz and the resumption of maritime blockades, global commodity liquidity is showing signs of tightening.
The continuous decline in US commercial crude inventories and the Strategic Petroleum Reserve (SPR) reaching historic lows are acting as a strong floor for West Texas Intermediate (WTI) prices.
Market Overview
As of intraday trading on July 21, 2026 (tentative), the domestic KOSPI is trading at 6,516.27 points, while the KOSDAQ is hovering around 749.64 points.
At the same time, the US NASDAQ is at 25,690.74 points, and the USD/KRW exchange rate is continuing its strong dollar trend at 1,480.90 won.
According to the Daily Stock Fear & Greed Index, the KOSPI is currently in the "Extreme Fear" stage (10.9), maintaining cold investor sentiment following last week's "Extreme Fear" level (13.8).
Conversely, the NASDAQ Fear & Greed Index is in the "Fear" stage (37.1), down slightly from the "Neutral" stage (40.9) a week ago, reflecting growing caution.
In the crude oil market, supply concerns have returned to the forefront as the US-Iran peace MOU for the Strait of Hormuz, signed on June 18, was scrapped.
As the US military resumed maritime blockade operations on vessels transiting the Strait of Hormuz, WTI crude prices surged past $80 per barrel, reaching $81.51 on the previous trading day, July 20.
Financial Analysis
The United States Oil Fund (USO), a major ETF tracking WTI crude oil, has a market capitalization of approximately $2.2 billion and represents key liquidity in the crude oil futures market.
USO closed at $124.70 on the previous trading day (July 20, 2026), jumping nearly 20% in a short period from the $104 level recorded in early July.
According to the US Energy Information Administration (EIA), commercial crude inventories for the week ending July 10 decreased by 1.7 million barrels to 409.7 million barrels.
At the same time, the US Strategic Petroleum Reserve (SPR) fell by an additional 5.1 million barrels last week to 311.4 million barrels, hitting its lowest level since March 1983.
| Category | Week of July 10, 2026 | Week of July 17, 2026 | Change vs. 5-Year Average |
|---|---|---|---|
| **Commercial Crude Inventory** | 409.7M barrels | Not confirmed (pending release) | Approx. 6% decrease |
| **Strategic Petroleum Reserve (SPR)** | 316.5M barrels | 311.4M barrels | Historic low since 1983 |
| **WTI Crude Price (per barrel)** | $71.41 | $81.78 ($81.51 as of July 20) | Surging due to short-term tensions |
| **USO ETF Price (Closing)** | $108.70 | $123.96 ($124.70 as of July 20) | Rebounded by over 15% |
Valuation
Crude oil market valuation is determined not just by simple supply volume, but by a complex global macro-decoupling among the US, Europe, and Asia.
The US market currently supports the value of WTI with robust domestic consumption backed by a strong refinery utilization rate of 96.2%.
On the other hand, the Eurozone is facing inflationary pressures as Brent crude surged back to the $85 level, pushing manufacturing refining margins to a four-year high.
In Asia, which is highly dependent on the Middle East, a decoupling trend is visible as rising import costs due to the Hormuz blockade slow down refining margins and weaken demand simultaneously.
Looking at the historical WTI price band, the $70 per barrel level acts as a strong production cost support line. With the current addition of the Hormuz risk premium, upward pressure on valuations remains relatively high.
Expert & Institutional Analysis
In its July report, the International Energy Agency (IEA) assessed that global oil demand has passed its May low and is entering a seasonal demand recovery phase.
However, it warned of a scenario where global oil supply could decrease by an average of 3.7 million barrels per day this year if tensions in the Strait of Hormuz persist.
The US Energy Information Administration (EIA) also analyzed in its Short-Term Energy Outlook (STEO) that while the decline in global oil inventories may be more gradual than initially expected, geopolitical wildcards will maximize price volatility.
Wall Street investment firms are highlighting that because the US SPR has depleted to critical limits, it is virtually impossible for the government to stabilize prices through additional releases.
Consequently, conditional upside scenarios where WTI prices could touch $85 to $90 per barrel in the short term are gaining traction.
Risk Factors
The most immediate risk is the paralysis of global supply chains due to escalating geopolitical conflicts in the Middle East and a prolonged physical blockade of the Strait of Hormuz.
Tightening global liquidity and diverging monetary policies among major nations (such as the ECB delaying rate cuts and the PBOC freezing the LPR) could cause a real slowdown in oil demand.
Additionally, if the strong dollar trend (with USD/KRW around 1,480.90 won) persists due to the prolonged high interest rate environment in the US, the purchasing power of emerging economies could deteriorate, risking demand stagnation.
Lastly, there is a risk that surging crude prices could reignite broad commodity inflation, triggering a global economic recession (stagflation).
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Investment Outlook Summary
At this juncture, WTI crude and related assets (like USO) have temporarily become more attractive as inflation hedges.
However, high oil prices driven by supply chain anxieties could ultimately trigger a global economic slowdown, leading to demand destruction in the long run.
With the domestic stock market in the "Extreme Fear" stage (10.9), investors should focus on phased entries and risk management rather than chasing high-volatility oil assets.
It is advisable to build flexible response plans while closely monitoring weekly US crude inventory releases and whether the Middle East maritime blockade is lifted.
Frequently Asked Questions
Q1. How does the decline in US crude inventories affect the domestic stock market?
A1. A decline in US crude inventories and geopolitical crises drive oil prices up. For export-driven economies like South Korea, this leads to higher import prices and corporate margin pressure, acting as a negative factor for the domestic stock market (KOSPI).
Q2. What does it mean that the Strategic Petroleum Reserve (SPR) is at its lowest level since 1983?
A2. It means that the US government's emergency oil reserves have reached their limit. If further upward pressure on oil prices occurs, the government will have fewer policy options to stabilize prices through market intervention.
Q3. Does the USO ETF track the WTI crude price exactly?
A3. USO is an ETF that tracks near-month WTI crude futures. While its direction is highly correlated with spot prices, minor discrepancies can occur due to roll-over costs incurred when rolling futures contracts every month.
Q4. What will happen to oil prices if the blockade on the Strait of Hormuz is lifted?
A4. Just as Brent crude plunged below $70 per barrel when the MOU was signed in June, normal transit would immediately resolve supply bottlenecks, likely causing a sharp technical correction in oil prices.
Q5. Is it safe to invest in oil-related stocks right now?
A5. Since the KOSPI is currently in the "Extreme Fear" (10.9) stage and geopolitical volatility is at its peak, chasing short-term rallies can be risky. It is safer to take a phased approach while monitoring refining margins and global economic indicators.