ING said softer Chinese demand and robust US exports have eased near-term strain in the oil market since the start of the war, although the effect is temporary. China’s crude imports in May 2026 fell 3.2m b/d year-on-year to 7.8m b/d, the weakest level since October 2017, while US export strength has been supported by inventory drawdowns rather than fresh supply growth.
The bank also pointed to strategic petroleum reserve sales as a buffer against higher prices, but these flows are set to diminish. The US SPR release is due to end by late July, and the expiry of such releases is expected to increase the pace of tightening in the oil market.
Temporary Price Softness Masks Underlying Tightness
The market seems to be overlooking the temporary nature of current oil price softness. Weaker crude imports from China, reflected in their recent manufacturing PMI data which registered a slight contraction at 49.8, are masking underlying tightness. This provides a brief window before fundamentals reassert themselves.
Similarly, strong US exports should be viewed with caution as they are not coming from new production. The latest weekly EIA report confirms this, showing a larger-than-expected crude inventory draw of 4.5 million barrels. This pace of depletion is not sustainable and points to a supply crunch.
Strategic Reserve Release Conclusion as a Catalyst
We see a major catalyst approaching as strategic reserve releases are set to conclude by the end of July. This backstop, which has been shielding the market from significantly higher prices, will be completely removed. The market will then have to face the supply deficit without this artificial support.
In the coming weeks, we believe it is prudent to start building long positions ahead of this late-July deadline. Buying call options or call spreads on WTI and Brent with August and September 2026 expiry dates could be an effective strategy. This allows us to position for the expected price increase while the market is still relatively calm.
This strategy is supported by historical precedent, such as the market action following the large SPR releases in 2022. Prices found a firm floor and began to rally as the market anticipated the end of that artificial supply. We expect a similar, if not more pronounced, reaction this time around.
