Crude oil prices are in freefall. The United States Oil Fund (AMEX:USO) dropped 4.04% on Saturday to close at $106.70, its worst single-session performance in recent weeks, as a confluence of supply-side developments drained the geopolitical risk premium that had kept oil elevated for months. The fund now sits just above its 52-week low of $105.65, having shed roughly 31% from its 52-week peak of $154.08.
At a Glance
- USO closed at $106.70, down 4.04% on the session, near its 52-week floor of $105.65
- Brent crude fell to just below $74 a barrel, a level last seen when the Iran conflict began on February 28
- UAE oil exports rebounded to roughly 85% of pre-war levels in early June, hitting approximately 4.3 million barrels per day
- Traders are pricing in the potential return of Iranian crude exports following a temporary sanctions waiver
- RSI on USO sits at 27.53, deep in oversold territory
| Price | 106.7 USD |
|---|---|
| Day change | -4.49 (-4.04%) |
| 52-week range | 105.65 – 154.08 |
| RSI (14) | 27.53 |
| Volume | 4,205,247 |
The Geopolitical Unwind Driving the Selloff
When fighting broke out in late February, oil markets added a sharp war premium almost immediately. Brent crude peaked at around $118 a barrel, and the disruption to shipping through the Strait of Hormuz, the chokepoint that handles roughly 20 million barrels of oil and petroleum products daily and about a quarter of global seaborne oil trade, kept that premium well supported for months. Before the conflict, the strait was processing approximately 125 to 140 vessel crossings per day. That volume cratered after hostilities began.
The situation is now unwinding faster than many analysts anticipated. Tanker traffic through the strait is recovering, and the International Energy Agency reported that UAE oil exports had climbed back to nearly 85% of their pre-war levels by early June, reaching approximately 4.3 million barrels per day. That figure is striking when set against the March low of just 1.9 million barrels per day, representing a recovery of more than 2.4 million barrels per day in a matter of weeks.
Progress in US-Iran peace talks has added another layer of bearish pressure. Traders are increasingly factoring in the possibility that Iranian crude exports could return more fully to global markets, driven by the temporary sanctions waiver that accompanied diplomatic progress. This expectation is contributing to the latest leg down in prices beyond the mechanical recovery in shipping volumes. Disagreements over nuclear inspections and the durability of any sanctions relief remain unresolved, meaning the situation carries genuine two-way risk, but the market is currently pricing the optimistic scenario.
Where Brent and WTI Stand Now
Brent crude fell to just below $74 a barrel, a level not seen since the day the conflict began. Prices have now declined by nearly 40% from their wartime highs, an extraordinary reversal over just a few months. The benchmark has traded below $80 in recent sessions but remains above the pre-war level of approximately $72.48, suggesting the market has not fully erased the conflict premium but is moving rapidly in that direction.
US benchmark crude dropped to $70.36 a barrel by 3 pm Central European Summer Time. It was trading near $67 before hostilities broke out, so roughly $3.36 of war premium remains embedded in WTI at current levels. The compression of that premium is precisely what USO's price action is reflecting.
Trump, the DOJ and the Pump Price Gap
One wrinkle in the oil price story is the disconnect between crude prices and retail gasoline costs. President Donald Trump posted on social media on Wednesday morning that gasoline prices are not falling in line with the drop in crude, and he announced that he had instructed the Justice Department to immediately investigate oil companies for price gouging. According to AAA data, the national average for regular gasoline stood at $3.93 a gallon at the time of writing. Costs at the pump have declined over the past month but by a narrower margin than crude's collapse would typically imply.
"In other words, customers are being 'gouged,'" Trump wrote. "I have instructed the DOJ to immediately start looking into this. Gasoline prices better start going down a lot faster than what I'm seeing!" The DOJ investigation adds a layer of political uncertainty for refiners and retail fuel distributors, even if its near-term impact on crude benchmarks is limited.
What the Numbers Say
USO's RSI of 27.53 places the fund in deeply oversold territory by conventional technical analysis standards. Readings below 30 are generally interpreted as indicating that selling pressure has been disproportionate to fundamentals in the near term, and a corrective bounce is statistically more probable than a continuation of the decline from this level. The fund's 52-week range of $105.65 to $154.08 tells the broader story: USO has given back nearly all of its wartime gains and is testing the lower bound of that range.
The bull case for a stabilization rests on several pillars. Peace negotiations are fragile, nuclear inspection disputes remain unresolved, and any breakdown in talks could rapidly reinstate the geopolitical premium. Traffic through the Strait of Hormuz remains below pre-war levels despite the recovery, and a single escalation incident could reverse that progress overnight. Meanwhile, OPEC production discipline, should it hold, could offset some of the anticipated supply increase from Iranian exports.
The bear case is harder to dismiss at these levels. If Iranian crude does return more fully to the market and Hormuz traffic normalizes completely, the global supply picture shifts materially. The IEA's data on UAE exports suggests the recovery is proceeding more quickly than initially expected, and the combination of diplomatic progress and restored shipping capacity could push Brent toward its pre-war level of $72.48 or below. For USO, that would imply a test or breach of its 52-week low. The fund carries no dividend yield to cushion holders against further price erosion, making it purely a directional bet on crude prices.
Gold and the Dollar Adding Context
The same session saw gold fall below the $4,000 per ounce threshold for the first time since November 2025. A stronger US dollar, which makes dollar-denominated commodities more expensive for foreign buyers, combined with rising rate expectations following a hawkish Federal Reserve meeting, pushed precious metals lower. Wall Street is now pricing an 85% probability of at least one Fed rate hike before year-end, up from 60% just a week earlier, according to CME Group data.
The 10-year Treasury yield stood at 4.48%, reflecting investor concern about the inflationary implications of elevated energy prices even as crude itself declines. Personal Consumption Expenditures data, the Fed's preferred inflation gauge, is due Thursday, and the release will inform whether rate hike expectations firm further. A stronger dollar and higher real rates both weigh on commodity prices broadly, amplifying the supply-driven pressure already hitting crude.
Frequently Asked Questions
Why is USO falling so sharply right now?
USO tracks crude oil prices, which have declined nearly 40% from wartime highs as shipping through the Strait of Hormuz recovers, UAE exports rebound, and traders price in the potential return of Iranian crude to global markets following a temporary sanctions waiver and diplomatic progress between the US and Iran.
What does an RSI of 27.53 mean for USO?
An RSI below 30 is conventionally read as oversold, meaning selling momentum has been intense relative to recent norms. It does not predict a reversal, but it does indicate that the fund is at an extreme reading where short-covering or value-buying can emerge. It is not a signal to buy or sell.
How does the Strait of Hormuz affect global oil supply?
The strait handles approximately 20 million barrels of oil and petroleum products per day, equivalent to roughly a quarter of all global seaborne oil trade, with around 125 to 140 vessel crossings daily under normal conditions. Any sustained disruption there tightens global supply significantly and pushes up benchmark prices worldwide.
What would need to happen for oil prices to recover from here?
A breakdown in US-Iran peace talks, a resumption of hostilities, or a fresh disruption to Hormuz shipping traffic could rapidly restore the geopolitical risk premium. Stronger-than-expected OPEC production cuts or a significant global demand uptick would also be supportive, though neither appears imminent given current data.
Where Crude Goes From the 52-Week Floor
USO at $106.70 is essentially sitting on the doorstep of its 52-week low. The supply picture has shifted meaningfully in just a few weeks: UAE exports up more than 2.4 million barrels per day from their March trough, Brent back below $74, and Iranian supply potentially returning to market. The risk premium that drove crude to $118 is largely gone. Whether the remaining gap above pre-war levels holds depends almost entirely on what happens next in the diplomatic process and in the Strait of Hormuz. The data, right now, is unambiguously bearish for crude.
