Crude Prices Soar on Dollar Weakness and Middle East Tensions

Crude oil prices are rising due to several factors, including the weakness of the US dollar and tensions in the Middle East. The September WTI crude oil (CLU26) is up 1.42% (1.67%) on Tuesday, while September RBOB gasoline (RBU26) is down 0.0122% (-0.37%).

The decline of the dollar index ($DXY) to a 2.5-month low has been supportive of energy prices, as it makes imports cheaper and increases demand for oil. The lack of a clear path to resolving tensions in the Middle East is also putting upward pressure on oil prices.

Ukraine's drone attacks on Russian oil infrastructure are further supporting crude prices. Russia's crude production fell to 8.89 million bpd in July, the lowest in six years, due to damage from these attacks. OPEC delegates have approved an increase of +188,000 bpd in crude production for September, but this may prove difficult to achieve amid renewed US-Iran military attacks.

The International Energy Agency (IEA) has reported that the global oil supply deficit will worsen despite a decline in oil demand due to the war and high prices. The IEA also stated that global oil inventories will fall at twice the previously estimated rate in Q3 due to ongoing disruptions from the US-Iran conflict.