Recap: The oil market retraced some of its previous losses as major airstrikes resumed in the Middle East, cutting hopes for a diplomatic resolution to the conflict. The market was well supported by U.S. President Donald Trump vowing retaliatory strikes against Iran after the U.S. military said it had averted a surprise Iranian attack on U.S. troops in the region. Iran stated that it had fired on ships in the Strait of Hormuz and at U.S. bases in Jordan. The market was also supported amid the escalating conflict as the U.S. and Saudi Arabia launched airstrikes on Iran-backed groups in Iraq on Wednesday, blaming them for drone attacks on Saudi oil facilities. The market opened higher, over the $80 level, and posted a low of $79.92 before it retraced almost 50% of its move from a high of $93.50 to a low of $77.78. The market rallied to a high of $85.57 by mid-day as it was further supported by the EIA reporting a large crude stock draw of over 7 million barrels for the week ending July 24th. The market later settled in a sideways trading range during the remainder of the session. The September WTI ended the session up $5.20 at $84.46 and the September Brent contract settled up $6.65 at $90.74. The product markets ended the session higher, with the heating oil market settling up 21.92 cents at $4.3701 and the RB market settling up 6.33 cents at $3.3978.
Technical Analysis: The crude market will remain supported as long as the escalating military strikes in the Middle East continues, with the U.S. promising retaliatory strikes against Iran in response to the surprise Iranian attack. The market will await to see how far the U.S. goes in its retaliatory attack on Iran, President Trump previously threatening to attack Iran’s infrastructure. Also, any further involvement by Saudi Arabia in airstrikes will provide further support. The oil market is seen finding resistance at $85.57, $85.64, $86.20 to $87.68, followed by $92.83 and $93.50. Meanwhile, support is seen at $80.83, $79.92, $77.78, $77.39, $77.20, $72.51 and $70.68.
Fundamental News: Preliminary shipping data showed that thirty-nine commodity ships passed through the Bab el-Mandeb Strait on Tuesday, the highest number since July 19th, while five transited on Wednesday, with only a few transiting through the Strait of Hormuz. Two of the five ships exiting the Bab el-Mandeb on July 29th were carrying crude oil, including very large crude carrier Sophia and the Aframax tanker Ocean Laureate. According to ship-tracking data from analytics firm Kpler, of the 39 ships passing through on July 28th, 20 ships entered the strait while 17 exited. Among those exiting, three were Aframax tankers carrying crude and of the ships that entered, two were tankers carrying petrochemical products. Meanwhile, only eight commodity ships passed through the Strait of Hormuz on Tuesday, with five entering and three exiting, while one passed through on Wednesday so far.
IIR Energy said U.S. oil refiners are expected to shut in about 179,000 bpd of capacity in the week ending July 31st, increasing available refining capacity by 57,000 bpd. Offline capacity is expected to fall to 103,000 bpd in the week ending August 7th.
The Trump administration is weighing whether to extend a September 1st deadline requiring oil refiners to demonstrate compliance with the nation’s biofuel blending laws, a move that could provide the industry more flexibility as it deals with elevated compliance costs. The Environmental Protection Agency has not made a final decision on the timing, and the agency is still publicly standing by the September 1st deadline for refiners to comply with the 2025 quotas under the Renewable Fuel Standard, which requires refiners to blend increasing amounts of biofuels into the nation’s fuel supply or purchase credits known as renewable identification numbers or RINs from those who do. An extension would give refiners more time to meet their obligations and could provide some additional room to manage high RIN prices, which have raised compliance costs for some companies. A delay could also give the EPA more time to review dozens of pending requests from smaller refiners seeking waivers from their obligations.
Early Market Call – as of 8:55 AM EDT
WTI – Sep $84.26, down 35 cents
RBOB – Aug $3.3392, down 5.22 cents
HO – Aug $4.2597, down 10.57 cents
