Recap: The oil market continued to trade in a sideways trading range as it weighed the escalating tensions in the Middle East and the risk to oil supplies moving through the Strait of Hormuz. On Wednesday, the U.S. struck Iran’s coastal defenses and missile sites on Wednesday after reimposing a naval blockade of its ports, while Iran threatened to shut off more regional energy exports, saying it was engaged in an “existential war” with the U.S. The escalation comes after a fragile truce reached in June collapsed, reviving fears of a return to full-scale conflict and disrupting energy flows through the Strait of Hormuz. Iran has also signaled it may use its Houthi allies in Yemen to shut the Bab el-Mandeb Strait, which has seen an increase in oil transit recently. The crude market traded to a high of $80.87 as it attempted to test its previous high. However, the market erased its gains as it failed to the upside and gradually sold off to a low of $78.58 ahead of the close. The August WTI contract settled down 65 cents at $78.95, while the September Brent contract settled down 72 cents at $84.23. The product markets ended the session in mixed territory, with the heating oil market settling up 8.24 cents at $4.0307 and the RB market settling down 1.62 cents at $3.2847.
Technical Analysis: The oil market will remain supported amid the escalating conflict and the fewer vessels traveling through the Strait of Hormuz amid the strikes and after the U.S. imposed its naval blockade on Iran. The market will also look to updates regarding the Iranian threats of targeting the Bab el-Mandeb Strait. A closure of the Bab el-Mandeb Strait would pose a new threat to global energy supplies. The crude market is seen finding resistance at $80.87, $80.93, $81.27 to $81.68, $83.34, $85.61 and $91.62. Meanwhile, support is seen at $78.58, $78.19, $77.84, $75.83, $74.16, $72.61, $72.48, $70.77 followed by $68.58, $67.82 and $67.04.
Fundamental News: The United States and Iran exchanged intensifying strikes on Thursday. In a statement, U.S. Central Command said U.S. forces began “a new wave of strikes against Iran for the sixth consecutive night to further degrade Iranian military capabilities” at 2 p.m. EDT or 9:30 p.m. in Tehran. On Thursday evening, U.S. projectiles struck Qeshm Island and near Bandar Abbas. Earlier, the White House said Iran continues to talk to the U.S. and wants to make a deal.
Iran said that the Strait of Hormuz was an inviolable “red line”, warning that if U.S. President Donald Trump carried out his threat to attack Iran’s infrastructure, it would strike all infrastructure across the Gulf region.
Yemen’s Houthi leader, Abdul Malik al-Houthi, said that all Saudi oil and other vital facilities would be targets for the group’s missiles and drones if Riyadh involved itself in what he described as “comprehensive aggression” against Yemen and moved toward escalation.
Shipping data showed that fewer vessels travelled through the Strait of Hormuz on Wednesday, the first day after the U.S. reimposed its naval blockade on Iranian ports with both countries escalating strikes across the Gulf. According to Kpler data, nine vessels crossed the strait on Wednesday, mostly on the Iranian route, down from 13 the previous day.
Four Iraqi oil and security sources said crude oil loading was suspended at all Iraqi terminals on Thursday after a drone crashed into an oil tanker at the Basra terminal, although it did not cause damage or a fire.
Early Market Call – as of 8:45 AM EDT
WTI – Aug $80.81, up $1.23
RBOB – Aug $3.3602, up 5.45 cents
HO – Aug $4.1241, up 5.13 cents
