The Oil Market Reacts to U.S. Sanctions on Iran

Recap: The oil market on Thursday rallied higher after U.S. President Donald Trump warned of retaliation against countries supporting Iran. On Wednesday evening, President Trump threatened “economic warfare and isolation on an unprecedented scale” against Iran, warning of consequences for any country that provided “any type of lifeline to Iran”. The September WTI contract on its last day as the spot contract posted a low of $85.60 in overnight trading before it rallied higher and posted a high of $89.00 by mid-morning. The market later erased some of its gains and settled in a sideways trading range during the remainder of the session. The September WTI contract went off the board up $2 at $87.83 and the October WTI contract settled up $2.44 at $86.83. The product markets ended the session higher, with the heating oil market settling up 2.8 cents at $4.4803 and the RB market settling up 78 points at $3.2629.

Technical Analysis: The crude market will continue to trend higher amid the continued impasse in resolving the Iran war. Despite the latest U.S. threats, Iran does not seem to want to give up its leverage, the control of the Strait of Hormuz. The market will remain well supported so long as there is no resolution to the conflict. The oil market is seen finding resistance, basis the October contract, at $87.69, $88.07, $88.54, $90.14, $90.65, $91.09 and $91.27. Meanwhile, support is seen at $84.23, $83.45, 80.80, $79.91, $79.31 and $76.80.

Fundamental News: U.S. Treasury Secretary, Scott Bessent, said the United States will impose “the toughest sanctions in history” on Iran and urged China to cooperate with Washington.

Oman’s Foreign Minister said lasting security in the Strait of Hormuz required permanent peace in the region and rejected further escalation or conflict. Iran has stated that a deal with Oman on new shipping lanes through the strait was in its final stages.

The Environmental Protection Agency said the Trump administration will allow sales of gasoline blended with 10% ethanol or E10 between September 1^st and September 15^th in an effort to increase the nation’s fuel supply and lower gas prices.

According to Environmental Protection Agency data, the U.S. generated 1.29 billion ethanol (D6) blending credits in July, up from 1.28 billion in June. Biodiesel blending credits (D4) fell to 796 million from 841 million in June.

Marathon’s 631,000 bpd Galveston Bay, Texas refinery experienced a coker unit upset which resulted in flaring above the reportable quantity. The unit was stabilized to stop flaring.

North Dakota’s Department of Mineral Resources said oilfield activity in North Dakota is set to increase in the second half of the year as operators add rigs and increase completions to collect high oil prices. The North Dakota rig count increased to 33 in August from 26 in July.

According to the Joint Organizations Data Initiative, Saudi Arabia’s crude oil output in June increased by 562,000 bpd on the month to 7.122 million bpd. It reported that Saudi Arabia’s crude exports in June increased to 3.993 million bpd from 3.434 million bpd in May.

Early Market Call – as of 9:25 AM EDT

WTI – Sep $86.94, up 73 cents

RBOB – Sep $3.3458, up 7.82 cents

HO – Sep $4.5374, up 5.63 cents

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