A thesis you have never tested is a hypothesis with good manners. This week the oil market took ours to the range and fired at it for five straight sessions.
Five Sessions, Ten Dollars
Start Friday, July 24. WTI settled at $89.31, up $7.53 on the week, after Brent gained roughly 10% in five days.
Monday: $82.61, down $6.70, after Washington paused strikes to give diplomacy a run. Tuesday: $79.26, down another $3.35, as talks seemed to progress.
Wednesday: $84.46, up $5.20 — more than 7% in one session. Iran had fired ballistic missiles at American forces in Jordan, and the United States struck back at dozens of targets.
That is a ten-dollar round trip in one week. The number of barrels the world can produce did not change at all. Only the odds around one shipping lane did.
The Physical Picture
Shipping through the Strait of Hormuz is still badly constrained. Weekly crude flows averaged 2.57 million barrels a day in the week beginning July 20, according to Kpler.
That is down roughly 61% from 6.60 million barrels daily in the week beginning July 6.
At home, commercial crude inventories fell by 7.2 million barrels, with refineries running above 97% of capacity. Supply policy drifted the other way: OPEC+ approved another increase of about 188,000 barrels a day for September.
The Ceiling Has a New Owner
Here is the part that quietly rewrites half our thesis, and it is not about supply at all.
During one of the worst energy crises on record, the market’s biggest customer simply stopped buying. China imported 11.6 million barrels a day on average in 2025. By June, that had collapsed to around seven million.
No single country has cut that much before, even in a bad recession. China’s economy grew 4.3% in the second quarter.
“We tend to joke among ourselves that China is the OPEC of oil demand,” says Homayoun Falakshahi of Kpler. Beijing tapped emergency reserves, slowed refineries and banned fuel exports. More than half of new cars sold there in 2025 were electric.
Kpler figures Beijing can keep imports suppressed for another six months and still hold close to 1.1 billion barrels in storage.
The floor is made of geopolitics. The ceiling is made of spare capacity and, we now know, one buyer’s ability to not show up for half a year.
The Scorecard, Honestly Kept
What held: the energy sleeve did its job. Chevron, Exxon Mobil and the pipeline names were the only natural hedge in the Capital Wealth Growth Portfolio on a day the Dow lost more than a thousand points.
We have said since May that we own the majors as a hedge, not a bet. Sleeve weight, no leverage, no timing. That construction made a violent week survivable.
What we got wrong: on July 23, with WTI at $84.91, we wrote that the risk premium looked full. It looked full for four sessions.
Then oil argued both directions inside a fortnight and finished within fifty cents of where we called it rich. The lesson is not that the level was wrong. It is that a level is the wrong unit of measurement in a war. The right unit is exposure.