Crude Prices Undercut as Tensions Ease in the Persian Gulf

Crude oil prices are trading lower as tensions in the Persian Gulf have eased slightly. September WTI crude oil (CLU26) is down -0.83 (-1.00%), and September RBOB gasoline (RBU26) is down -0.0026 (-0.08%). The reduction in market concerns about the Middle East follows news that the Trump administration is pivoting to using a naval blockade to apply economic pressure on Iran, rather than new military attacks.

The Strait of Hormuz remains congested, tightening global crude supplies and boosting oil prices. Only an average of five vessels are transiting through the Strait daily, down from 14 ships a day seen after the US and Iran reached a memorandum of understanding in June, according to Energy Aspects. The International Energy Agency (IEA) said that despite ongoing disruptions from the US-Iran war, global oil inventories will fall at twice the previously estimated rate this quarter.

Ukraine's drone attacks on Russian oil infrastructure are also providing support for crude prices. Ukraine has attacked Russian refineries, oil tankers, and major pipeline infrastructure at least 30 times in July, causing damage to facilities and a decline in refining capacity. The strikes have deepened a nationwide gasoline shortage, with several major refineries shut down and the government banning almost all gasoline exports.

OPEC's production increase of +188,000 bpd in crude output for September may also prove difficult to achieve amid renewed US-Iran military attacks in the region. Crude oil stored on tankers that have been stationary for at least 7 days fell -0.7% w/w to 119.28 million bbl in the week ended August 7, according to Vortexa.