Recap: The oil market continued to sell off, breaching a support line and ending the session 4% lower on hopes for a resolution to the U.S.-Iran war. The market remained under pressure after U.S. President Donald Trump, who called off a two-week military campaign over the weekend, stated that “good talks” were underway with Iran, while also threatening to restart strikes if negotiations failed. Meanwhile, Oman gained support from Gulf countries for a plan that would let Iran collect voluntary fees to use the Strait of Hormuz. The crude market posted a high of $82.43 in overnight trading and continued on its downward trend, breaching a support line at $79.22 and retraced more than 50% of its move from a low of $67.12 to a high of $93.50 as it posted a low of $77.78 in afternoon trading. The market later settled in a sideways trading range ahead of the close. The September WTI contract ended the session down $3.35 at $79.26 and the September Brent contact settled down $4.27 at $84.09. The product markets ended the session higher, with the heating oil market settling up 3.93 cents at $4.1509 and the RB market settling up 72 points at $3.3345.
Technical Analysis: The crude market will remain headline driven as the market waits to see if there can be a diplomatic solution to end the war with Iran and whether Oman agrees to Iran’s proposed temporary arrangement to reopen the Strait of Hormuz. Iran rejected an Omani proposal for an equal division of transit routes between the two countries. The oil market is seen finding support at $77.78, $77.39, $77.20, $72.51 and $70.68. Meanwhile, resistance is seen at $82.43, $83.79, $85.64, $86.20 to $87.68 followed by $92.83 and $93.50.
Fundamental News: Yemen’s Houthis said that they had fired ballistic missiles at a Saudi oil tanker, accusing the vessel of violating what they described as their maritime blockade on Saudi Arabia in the Red Sea and ignoring warning calls. The Iran-aligned group’s military spokesperson, Yahya Saree, said the vessel was forced to turn back.
According to Kpler shipping data, the number of vessels passing through Bab el-Mandeb increased to 28 on Monday, a four-day high, while traffic through the Strait of Hormuz remained low, amid optimism about a potential resolution to the U.S.-Iran conflict. Traffic was still below the month’s peak of 46 vessels recorded on July 14th. Out of 12 vessels that entered the Red Sea on Monday, four were oil tankers. The 16 vessels that exited the Red Sea on Monday included 10 oil tankers. Hong Kong-flagged VLCC New Pearl carrying 2 million barrels of Saudi crude exited the Red Sea for eastern China’s Zhoushan port, the fourth Chinese supertanker to leave since the Houthis declared a naval blockade. Meanwhile, traffic via the Strait of Hormuz remained low with six commodity-carrying vessels transiting the waterway on Monday, including one Iranian-linked Suezmax tanker and a VLCC which entered with its transponder off. Of those vessels, four entered the strait and two exited it. Seven vessels transited the strait on Sunday, including three Iranian-linked oil products tankers that exited the strait.
Kpler and AXSMarine data showed that visible crude loadings from the Red Sea port of Yanbu fell by at least 30% last week after Yemen’s Houthis declared a blockade on Saudi Arabia, while Vortexa estimated that exports remained broadly stable, citing a rise in so-called dark tanker loadings. Data from Kpler, Signal Ocean and AXSMarine shows average exports of crude and condensate fell to between 2.4 million and 3 million bpd in the week starting July 20th. Exports in the previous week had averaged 4.23 million bpd, according to Kpler. AXSMarine said loading voyages fell to 16 last week from 35 in the previous week. Data from Vortexa showed loadings at 3.8 million bpd last week, broadly stable from the previous week. The company said the use of dark loads had increased, with four VLCCs, one Suezmax and one Aframax loading with AIS transponders switched off, accounting for about a third of volumes lifted during the week.
Early Market Call – as of 8:40 AM EDT
WTI – Sep $84.18, up $5.05
RBOB – Aug $3.3769, up 5.03 cents
HO – Aug $4.3065, up 15.3 cents
