Oil Prices Close Higher, but WTI Falls 7.7% for the Week: Why Did the Trends Diverge?
International oil prices rebounded in the U.S. market on August 7 but fell sharply over the week as a whole. Brent crude closed at USD 83.55 per barrel and WTI at USD 78.18. On a weekly basis, WTI fell 7.7%, while Brent declined 5.0%.
Therefore, the statement that 'oil prices fell 7% for the week' is most accurate when describing WTI's performance. A single-day increase on Friday and a weekly decline are not contradictory movements.
Why Did International Oil Prices Rise Again on Friday?
On August 7, Brent crude futures settled at USD 83.55, up 1.3% from the previous trading session. West Texas Intermediate (WTI) crude futures closed at USD 78.18, gaining 1.15%.
The main reason for Friday's rebound was that uncertainty surrounding the Strait of Hormuz had not completely disappeared.
Until earlier this week, markets had increasingly expected shipping traffic through the Strait of Hormuz to return to normal and tensions between the United States and Iran to ease. Expectations of fewer disruptions to Middle Eastern oil shipments reduce the geopolitical risk premium built into crude prices, putting downward pressure on oil.
However, actual negotiations left several issues unresolved, including shipping conditions, transit fees, and U.S. sanctions.
On the Iranian side, a proposal was discussed to charge certain vessels using the strait a fee equivalent to 5~7% of their cargo value. Discussions involving Oman mentioned a fee of approximately 3%, while the United States maintained its demand for free passage, leaving substantial differences between the proposed conditions.
Oil prices had fallen on expectations that an agreement was imminent. As markets began reassessing the actual terms of a potential deal and whether it could be implemented, prices recovered some of their earlier losses on Friday.
Why Did Oil Prices Still Fall Nearly 7% for the Week?
The losses accumulated throughout the week were much larger than the movement on a single day.
Although WTI rebounded 1.15% on Friday, it still declined 7.7% over the week. Brent also gained 1.3% on Friday but fell 5.0% across the full week.
Earlier in the week, expectations that shipping through the Strait of Hormuz could normalize and tensions in the Middle East could ease were rapidly reflected in oil prices. Selling intensified as traders priced in the possibility of reduced supply disruption risks even before negotiations produced a concrete outcome.
Monday's losses were particularly steep after reports emerged that the United States had canceled plans to attack Iran and was pursuing negotiations. Brent crude plunged 7% in a single day, contributing to the substantial losses early in the week.
Friday's increase of around 1% was not enough to recover the preceding losses.
Based on the author's calculations, a simple reverse calculation using the weekly percentage change suggests that WTI was trading at approximately USD 84.7 at the end of the previous week.
USD 78.18 ÷ (1 - 0.077) ≈ USD 84.7
Applying Brent's weekly decline of 5.0% similarly suggests that its price fell from approximately USD 88.0 to USD 83.55.
USD 83.55 ÷ (1 - 0.05) ≈ USD 88.0
Because the reported weekly percentage changes are rounded, these reverse-calculated prices are also approximate.
An Important Difference Hidden by the Headline 'Down 7% for the Week'
Assuming Brent and WTI declined by the same percentage can lead to a misunderstanding of actual market movements.
WTI fell 7.7% this week, while Brent declined 5.0%. Both crude benchmarks moved lower, but the size of their losses differed.
Brent crude, primarily associated with North Sea oil production, serves as a major benchmark for global crude trading. WTI is the benchmark representing the U.S. crude oil market. Because the two benchmarks do not respond identically to Middle Eastern supply risks and U.S. domestic supply-and-demand conditions, their short-term price movements can differ.
When reading international oil market news, it is more accurate to check whether a reported percentage change refers to Brent or WTI rather than relying only on a headline stating how much oil prices moved.
The Strait of Hormuz Will Be the Biggest Factor Determining Oil Prices Next Week
The most important factor currently influencing international oil prices is whether shipping through the Strait of Hormuz actually returns to normal.
Announcing an agreement alone is not sufficient. Markets must also assess whether ships can pass through the strait at levels close to those seen previously, whether restrictions apply to vessels from particular countries, and whether additional fees or insurance issues have been resolved.
If an agreement is implemented smoothly and Middle Eastern oil transportation returns to normal, reduced concerns about supply disruptions could create additional downward pressure on prices.
Conversely, if negotiations are delayed or attacks on ships and military confrontations intensify again, oil prices could experience another sharp short-term movement.
In a market where a single geopolitical development can move prices by several percentage points in one day, it is difficult to assume that prices will continue falling next week simply because they declined 7% this week.
Forecasts of Further Oil Price Declines Are Not Certain Either
Market forecasts have not converged on a single direction.
Citi raised its average Brent crude price forecast for 2026's 3 quarter from USD 75 to USD 80 per barrel, reflecting the fact that resolving tensions between the United States and Iran is taking longer than expected. However, it maintained its forecast of USD 70 for the 4 quarter and USD 65 for the full year 2027.
This outlook suggests that geopolitical risks could support oil prices in the short term while leaving open the possibility of lower prices if tensions ease.
A forecast from any individual institution does not guarantee future prices. International oil prices are currently being heavily influenced not only by crude supply and demand but also by negotiations over passage through the Strait of Hormuz and changes in military tensions. It is therefore more appropriate to view the market as being in a period of elevated volatility.
Will Gasoline Prices in South Korea Fall Immediately if Oil Prices Decline?
A sharp weekly decline in international crude prices does not mean that prices at South Korean gas stations will immediately fall by the same percentage.
As of August 7, the nationwide average retail price of regular gasoline at South Korean gas stations was KRW 1,865.14 per liter, while automotive diesel averaged KRW 1,848.05 per liter. These prices were lower than the previous day by KRW 0.28 and KRW 0.37, respectively.
Domestic petroleum product prices reflect not only international crude oil prices but also the Korean won-U.S. dollar exchange rate, the actual prices and timing of crude oil imports by refiners, international refined petroleum product prices, taxes, and distribution costs.
Therefore, even if international oil prices plunge over several days, it is unrealistic to expect gas station prices to fall by the same percentage the following day.
For drivers in South Korea, it is more practical to monitor whether international refined petroleum product prices and the won-dollar exchange rate move in the same direction over the next 1~2 weeks than to focus on a single movement in international crude prices.
Three Things to Watch in the Next Trading Sessions
When assessing the direction of international oil prices next week, the first priority is to determine whether negotiations over the Strait of Hormuz lead to an actual normalization of shipping traffic.
It will also be important to watch whether military confrontations between the United States and Iran intensify again and whether the movement of crude oil and petroleum product tankers through the Middle East stabilizes.
If all three factors move toward reducing concerns about supply disruptions, this week's downward trend could continue. Conversely, if negotiations become unstable again, the geopolitical risk premium could quickly return, as it did on Friday.
The increase in international oil prices on August 7 is better interpreted as a rebound reflecting renewed uncertainty surrounding the Strait of Hormuz after a sharp weekly decline, rather than a signal that the overall trend has definitively reversed upward.
※ This article is provided for informational purposes to help readers understand market developments and does not constitute investment advice or a recommendation to buy or sell any particular security or asset. Readers are responsible for their own final investment decisions and the associated risks.