Recap: The crude oil market ended lower amid talks between Oman and Iran over the Strait of Hormuz and a proposed plan for a Saudi-led maritime coalition while the U.S. and Iran continued to trade strikes on each other’s military targets. The oil market remained supported in overnight trading and posted a high of $85.94 amid the reports of the U.S. striking Iranian targets. The U.S. military said it hit dozens of Islamic Revolutionary Guard Corps targets in Iran in an operation launched after Tehran fired ballistic missiles at U.S. forces in the Middle East. However, the market later gave up some of its gains and posted a low of $82.97 by mid-morning on news that Iran and Oman were continuing their talks regarding management of the Strait of Hormuz. The market later settled in a sideways trading range during the remainder of the session on news of Saudi Arabia’s plans for multinational maritime defense coalition aimed at protecting international shipping and energy supply routes in the Red Sea region. The September WTI contract settled down 87 cents at $83.59 and the September Brent contract settled down $1.71 at $89.03. The product markets ended the session lower, with the heating oil market settling down 16.07 cents at $4.2094 and the RB market settling down 11.31 cents at $3.2847.
Technical Analysis: The oil market on Friday is seen remaining in its recent trading range as it weighs the continuing conflict, with strikes in Iraq and Egypt threatening to draw more Middle Eastern countries into the war and the latest news of Saudi Arabia seeking a coalition to increase defense cooperation around the Red Sea after Iran-aligned Houthi militants declared a naval blockade on Saudi Arabia. The crude market is seen finding support at $82.97, $81.61, $79.92, $77.78, $77.39, $77.20, $72.51 and $70.68. Meanwhile, resistance is seen at $85.94, $86.20 to $87.68, followed by $92.83 and $93.50.
Fundamental News: According to Kpler data, nineteen commodity ships passed through the Bab el-Mandeb strait on Wednesday, down from the transit on Monday and Tuesday. LSEG put the number of transits at 26. Of the 19 ships passing through according to Kpler, eight entered the strait while 11 exited. Among those exiting, four were tankers carrying crude. Some ships could still be sailing with their transponders turned off, which are not considered in the counts.
Two tankers carrying Saudi crude for Indian refiners have exited the Red Sea through the Bab el-Mandeb Strait by sailing “dark” after Yemen’s Iran-aligned Houthis announced a blockade on Saudi shipments. The Suezmax tanker Amazon, chartered by Indian Oil Corp, loaded 1 million barrels of oil and Aframax Rodos lifted 700,000 barrels of crude for Mangalore Refinery and Petrochemicals Ltd at Saudi Arabia’s Yanbu port around July 20th and briefly turned north towards the Suez Canal. However, the Amazon and Rodos then switched off their Automatic Identification System transponders around July 22, preventing public tracking of their moves, and headed south to exit the Red Sea through the Bab el-Mandeb Strait. The Rodos is expected to arrive at India’s Mangalore port on August 1st, while the Amazon is scheduled to reach Chennai in early August.
London’s marine insurance market has widened the area in the Red Sea it deems as high risk after attacks on ships by Yemen’s Houthi movement but Egyptian waters were excluded. The extended high-risk zone takes in more of the Red Sea coast adjacent to Saudi Arabian ports and reaches close to the Saudi port of Jizan.
Goldman Sachs stated that diesel is at the center of a supply squeeze in fuels as global refinery activity fell this month to its lowest seasonal level since the pandemic.
Early Market Call – as of 8:50 AM EDT
WTI – Sep $85.47, up $1.51
RBOB – Aug $3.2436, down 52 points
HO – Aug $4.2927, up 9.89 cents
