West Texas Oil is down another 5 percent to $80.52. Brent is $83.27. Still looking lower?Technically speaking the chart is mess.One can draw a symmetrical triangle that failed or a descending triangle that looks like it has further downside ahead.Yet, the chart is so messy and spikey that nothing looks convincing. Instead let’s discuss key fundamentals.Three Reasons the Price of Oil May Have BottomedChina’s restrained buying was artificial demand destructionChina, the US, Japan, and the EU need to replenish strategic reserves.Infrastructure damage in the reason was extensive. Return to full production will take time.1) China’s Artificial Demand DestructionChina slashed crude imports significantly (from ~11.7 mb/d in Feb to under 9 mb/d by late May) amid the Strait closure and high prices. Analysts (JPM, SocGen, etc.) credit this with acting as a “pressure valve,” preventing a much worse spike (potentially $150–200+ otherwise).Once flows resume and prices stabilize or dip, China is expected to ramp up purchases aggressively. This pent-up demand could accelerate inventory rebuilding and support prices in H2 2026.China also has substantial strategic and commercial stocks built pre-crisis, but the import cut created real deferred demand.2) Strategic Oil Reserves ReplenishmentUS SPR: Released substantial volumes (part of the ~400 mb IEA-coordinated draw); levels are critically low per executives (down tens of millions more). Rebuilding will add demand.China: Holds the world’s largest strategic inventories (~1.4 billion barrels total pre-crisis estimates). They were filling aggressively before and are positioned to refill commercial/strategic stocks.Japan & others: Also released and will need to replenish (Japan prioritized Asia in releases).This creates a multi-quarter tailwind for demand as the market normalizes. Low global inventories (big draws during the shock) mean restocking could prevent a collapse even as supply returns.3) Extensive Infrastructure damageEven with Strait reopening under the ceasefire, full production recovery will take months (Kuwait: 3–4 months; Iraq southern fields: up to 9 months in some estimates; Qatar LNG: years in worst cases).(Chevron, Exxon) and analysts warn of a “Hormuz Hangover” — lingering tightness, slow tanker normalization, and low inventories could keep prices elevated or cause re-spikes.Counterforce Demand Destruction IdeaIf the oil spike tips major economies into genuine contraction, the rebound weakens.Europe looks most vulnerable. The US appears more resilient but it’s not immune. High prices self-correct via destruction, which could cap upside even with restocking.However, the demand destruction idea would take real, not artificial demand destruction.Much of the destruction was crisis-specific: Strait blockage, physical shortages, government fuel-saving mandates, and precautionary destocking (especially China drawing stocks instead of buying). These reverse faster than a structural recession.Restocking tailwind remains: Low inventories (OECD at multi-decade lows) + SPR draws mean rebuilding demand even in a soft-landing economy. Executives highlight “Hormuz Hangover” — slow production restarts could keep the market tight into late 2026. x.comNon-OECD resilience: China/India/Asia still drive long-term demand. A ceasefire removes the acute shock; efficiency gains and substitution take time to bite deeply.Two Wildcard Factors Supporting Higher PricesThe deal can easily fail for numerous reasonsStrait fees may add to the global price of oilOn the other side of the balance sheet is a production ramp from Venezuela.However, Venezuela doesn’t overwhelm the bullish factors in the near to intermediate term. A few hundred thousand barrels per day extra from Venezuela is meaningful but gradual.Core CPI Inflation Looks Contained. It’s a Mirage Ignoring ServicesEarlier today I noted Core CPI Inflation Looks Contained. It’s a Mirage Ignoring ServicesLet’s discuss goods and services. The latter is 63.4 percent of the CPI.Neither the bond market nor CPI services support the demand destruction idea right now.As for the deal itself, please see A Peek at Trump’s Deal with Iran. What’s Inside?Other than strait re-opened, much of this is still speculation. But here’s the discussion.SynopsisThe three key factors plus two wildcards dramatically outweigh demand destruction ideas plus Venezuela.Market psychology (bearishness) might prevail for a while, but without genuine demand destruction it won’t stick.Oil looks to be a buy from this point of view.Original Post