Recap: The oil market on Thursday ended the session lower as the market weighed the impact of the renewed U.S. strikes against Iran on the peace talks and the reopening of the Strait of Hormuz. Late Wednesday, the U.S. launched strikes on Iran, which responded with attacks on Kuwait and Bahrain. The market traded to a high of $75.13 on the reopening on Wednesday evening amid the reports of the U.S. military strikes. However, the market eased off its high and traded lower throughout the session. While the U.S. launched further strikes on Iran, U.S. President Donald Trump on Wednesday stated that he did not see a return to a full-fledged war with Iran, which likely limited the market’s gains despite the renewed tensions in the Middle East. The market retraced little more than 50% of its move from a low of $67.04 to a high of $76.08 as it posted a low of $71.42 ahead of the close. The August WTI contract settled down $1.44 at $72.08 and the September Brent contract settled down $1.72 at $76.30. The product markets ended the session lower, with the heating oil market settling down 8.59 cents at $3.5716 and the RB market settling down 6.42 cents at $3.0387.
Technical Analysis: The crude market will remain in its recent trading range as the market continues to assess the situation in the Middle East. The market will look to see if negotiations between the U.S. and Iran will continue following two days of attacks and how soon tanker traffic through the Strait of Hormuz will gradually begin to increase again. The market is seen finding support at $71.42, $68.58, $67.82 and $67.04. Meanwhile, resistance is seen at $75.13, $76.08, $77.12, $78.14, $79.18, $80.15, $80.23, $81.00 to $81.68 and $83.34.
Fundamental News: Analysts and officials said governments are set to buy millions of barrels of oil through 2028 to rebuild emergency reserves depleted by drawdowns to plug a gap in global supply caused by the U.S.-Israeli war on Iran. They said this could increase demand for crude that would absorb some of the expected global supply surplus following OPEC+’s decision to increase output. According to Reuters calculations based on International Energy Agency, OPEC and U.S. Department of Energy data, governments drew down emergency reserves after supply disruptions linked to the conflict removed an estimated 1.5 billion barrels from global inventories this year. Kpler estimated that replenishing those reserves could add up to 664,000 bpd of demand by third quarter 2027, helping to absorb some of the excess supply expected next year as OPEC+ continues to unwind production cuts. Christopher Haines, head of oil at consultancy Energy Aspects, said restocking of reserves would lead to a higher price floor in 2027.
Goldman Sachs said the latest strikes in the Strait of Hormuz could slow the ramp-up in Middle East oil production, while the cancellation of the U.S. sanctions waiver could once again weigh on exports of Iranian oil, which had only recently begun to recover. Goldman Sachs said it sees two-sided risks to Persian Gulf oil flows and near-term prices. The bank said it still expects Persian Gulf flows to return to normal by the end of July if the 60-day negotiations continue, the waiver on Iranian oil is reinstated and shippers receive security assurances. That scenario would require Hormuz flows to increase by 6.6 million bpd. Goldman Sachs stated that following the recent attacks on tankers, Persian Gulf oil exports are running at 71% of normal levels, down from 83% of pre-war flows reached within the first 10 days after Hormuz reopening in June. Meanwhile, the bank also noted that the ramp up of attacks on Russian refineries amid low product inventories and subdued Middle East and Asia runs amplifies their view that refined product margins will remain higher for longer.
Bloomberg reported that unprecedented overseas demand for U.S. diesel, propane and other fuels is straining commercial reserves from the Gulf Coast to the Eastern Coast as the U.S.-Iran conflict reintensifies. It said demand for U.S. fuel probably will not abate any time soon, given the absence of shipments from Russia.
Early Market Call – as of 8:45 AM EDT
WTI – Aug $72.23, up 42 cents
RBOB – Aug $3.0036, down 1.67 cents
HO – Aug $3.6153, up 6.33 cents
