Recap: The oil market continued to trend higher on Tuesday in light of the continuing attacks exchanged by the U.S. and Iran and threats of a naval blockade on Saudi Arabia by Yemen’s Houthi militants. Ahead of the August contract’s expiration at the close, the market traded mostly sideways in overnight trading. It posted a low of $82.25 before it bounced off that level and continued on its upward trend. It rallied to a high of $85.80 by mid-morning amid the escalating military strikes, with the U.S. striking targets in southern Iran and Iran targeting U.S. sites in Bahrain, Kuwait and Jordan. It was also well supported by reports of lower exports through the Strait of Hormuz and concerns of potential supply disruptions from the Red Sea. The market later settled in a sideways trading range during the remainder of the session amid reports that Iran received a proposal from mediators for a 10-day ceasefire in efforts to salvage the deal signed on June 17th. The August WTI contract went off the board up $1.68 at $84.91, while the September WTI contract settled up $1.86 at $84.34 and the September Brent contract settled up $1.79 at $91.01. The product markets ended the session higher, with the heating oil market settling up 76 points at $4.1266 and the RB market settling up 1.69 cents at $3.4059.
Technical Analysis: The crude market will remain well supported by the continuing conflict in the Middle East and will look for further updates on whether Iran accepts a proposal calling for a 10-day ceasefire. The market will remain supported as long as the exports through the Strait of Hormuz remain lower and the threats of supply disruptions of oil coming through the Red Sea exist. The Houthis’ threat appeared to already impact the flow of oil as two tankers loaded with Saudi crude at Saudi Arabia’s Red Sea port of Yanbu made u-turns on Tuesday, heating towards the Suez Canal rather than out through the Bab el-Mandeb into the Indian Ocean. The market is seen finding resistance, basis the September contract at $85.03, $87.23, $89.48, $89.75, $89.90 followed by $92.07, $94.02, $94.71, $95.07 and $95.30. Meanwhile, support is seen at $81.39, $79.58, $77.93, $77.77, $77.39 followed by $72.51 and $70.68.
Fundamental News: BP said that it had removed some non-essential personnel from its Thunder Horse and Na Kika platforms in the U.S. Gulf of Mexico as a precaution ahead of an approaching storm. Tropical storm Bertha was located about 170 miles southeast of Mobile, Alabama and packed maximum sustained winds of 50 miles per hour. The U.S. National Hurricane Center said that tropical storm watches and warnings remain in effect for portions of the north Gulf coast.
S&P Global forecasts U.S. oil output will expand by about 250,000 barrels in 2026. It said that if that holds, it would be the smallest expansion since the US oil industry rebounded from the pandemic. The Trump administration has repeatedly called on U.S. companies to increase crude output, often to no avail because management teams were reluctant to invest in new wells when oil prices were not high enough to meet profit levels. However, now that oil prices have remained sufficiently above the range of $62 to $70/barrel that economists say producers need to turn a profit, companies are willing to increase their output.
The International Energy Agency said around 290 million barrels of oil have been released by its member countries.
Goldman Sachs said that Brent crude could surpass $120/barrel in the fourth quarter this year and average $100/barrel next year if flows through the Strait of Hormuz remain disrupted and Gulf output only fully recovers by the end of 2027. Goldman Sachs analysts said the latest Middle East escalation and the decline in estimated Gulf flows to below 45% of pre-war levels imply net upside risks to its $80/barrel forecast for the fourth quarter and $75 for 2027, which assumed de-escalation in the last quarter this year.
Early Market Call – as of 8:50 AM EDT
WTI – Sep $86.94, up $2.37
RBOB – Aug $3.4460, up 3.9 cents
HO – Aug $4.1970, up 5.34 cents
