Recap: The oil market posted an inside trading day on Wednesday as the market weighed the lack of progress on a permanent end to the war in Iran and the news of attacks on shipping in the Gulf against the unexpected large build in crude oil inventories and OPEC and the IEA cutting their demand growth forecasts. The market traded higher in overnight trading as it retraced some of Tuesday’s losses after the U.S. and Yemen’s Iran-aligned Houthis reported separate attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait. The crude market posted a high of $84.35 before it once again erased its gains. The market sold off to a low of $82.40 as the EIA reported the largest crude oil inventory build since January 2023. The market’s losses were limited as a senior Iranian source stated that there were no discussions between Iran and the U.S. to extend their ceasefire because from Iran’s perspective, the deal had no start date and there was nothing to extend. The oil market later settled in a sideways trading range. The September WTI contract ended the session up 7 cents at $83.27 and the October Brent settled up 7 cents at $88.98. The product markets ended the session higher, with the heating oil market settling up 5.15 cents at $4.3040 and the RB market settling up 1.71 cents at $3.1537.
Technical Analysis: The crude market will remain well supported as talks to end the Iran has hit an impasse, with Iran stating that the U.S. must return to the pact and define a timeframe to implement its commitments. Iran has stated that the Strait of Hormuz will remain closed unless the U.S. changes its behavior and accepts Iran’s conditions while U.S. President Donald Trump said on Wednesday that the U.S. owned the Strait of Hormuz. The oil market is seen finding resistance at $84.35, $84.61, $86.14, $86.87 to $87.68, $92.83 and $93.50. Meanwhile, support is seen at $82.40, $81.27, $77.79, $76.53, $74.57, $74.57, $74.24, $72.51, $70.68, $68.61, $67.82 and $67.12.
Fundamental News: The IEA said global oil supply will fall by 4.3 million bpd or around 4% this year, as renewed hostilities in the Middle East since July are set to plunge the world deeper into an oil-market deficit. The 4.3 million bpd supply drop compares with the 3.7 million bpd forecast in the IEA’s July report, and will take total supply to the IEA’s lowest forecast yet for this year at 102.02 million bpd. That would put global oil supply about 1.27 million bpd below demand this year, widening from an 860,000 bpd deficit implied from the IEA’s July forecast. The IEA sees world oil supply 4.61 million bpd above total demand, assuming a de-escalation in the coming months. It expects global demand to contract this year by 1.6 million bpd, steeper than the 1 million bpd decline previously expected. The IEA said world oil refining was 5 million bpd below year ago levels in July as spare capacity was unable to offset product supply bottlenecks.
OPEC lowered its forecast for world oil demand growth in 2026 to 580,000 bpd from a previous forecast of 780,000 bpd, marking the fourth straight downward revision. OPEC also raised its forecast for 2027 oil demand growth to 2.16 million bpd from a previous estimate of 1.94 million bpd. OPEC stated that OPEC+ output averaged 37.66 million bpd in July, up about 1.42 million bpd on the month, led by gains in Gulf producers.
IIR Energy said U.S. oil refiners are expected to shut in about 141,000 bpd of capacity in the week ending August 14th, increasing available refining capacity by 22,000 bpd. Offline capacity is expected to fall to 8,000 bpd in the week ending August 21st.
The latest Trump administration sale of oil and gas drilling rights in the Gulf of Mexico attracted nearly $82.7 million in high bids on Wednesday. The Trump administration offered more than 80 million acres in the Gulf of Mexico to drillers as part of an effort to increase domestic energy production with regular offshore lease sales.
Early Market Call – as of 9:30 AM EDT
WTI – Sep $80.96, down $1.63
RBOB – Sep $3.1515, up 1.36 cents
HO – Sep $4.2660, down 2.12 cents
