Crude Oil Prices Sharply Higher on Supply Disruptions

August WTI crude oil (CLQ26) on Tuesday closed up +1.89 (+2.76%), and August RBOB gasoline (RBQ26) closed down -0.0494 (-1.64%).

Crude oil and gasoline prices settled mixed on Tuesday.  Crude oil prices jumped following attacks on shipping in and around the Strait of Hormuz.  Gasoline prices retreated on Tuesday as the crude crack spread fell more than -5%. The crack spread had surged to a 4-year high on Monday.

Crude prices rallied sharply higher on Tuesday after Axios reported that a projectile hit a Qatari LNG gas carrier and a laden Saudi oil tanker suffered damage near the Omani coast as they exited the Strait of Hormuz.  Axios also reported earlier that Iran fired at least two missiles at commercial ships transiting through the strait.  Crude prices may add to their gains if the US responds to Iran over the attacks.

Crude oil prices raced to their high Tuesday afternoon when the US Treasury Department revoked the Iran oil waiver that allowed buyers to legally purchase and transport Iranian oil in response to renewed attacks by Iran on commercial shipping in the Strait of Hormuz.

Crude prices were pressured on Monday after Saudi Arabia cut the price of its Arab Light oil to Asian customers for delivery next month by $11 a barrel, a larger decline than the -$8 a barrel expected.

Crude prices posted a 4.25-month low on Thursday as the recovery in oil flows through the Persian Gulf accelerated, sparking concerns of a supply glut.  According to data compiled by Bloomberg, Saudi Arabian crude exports have risen to 6.3 million bpd, or 90% of pre-war levels.  Also, the UAE ramped up shipments of crude oil and condensates by 30% in June to more than 3.9 million bpd, restoring its oil exports to pre-war levels.

Stronger Russian crude exports are also adding to global oil supplies and undercutting prices.  Data compiled by Bloomberg show the four-week average of Russian crude exports rose to 4.13 million bpd through June 28, the highest since Russia invaded Ukraine in 2022.  Russia may be boosting its crude exports as the country’s refining capacity has plunged due to damage at its refining facilities from Ukraine drone and missile attacks.

The International Energy Agency (IEA) warned on June 17 that the Iran war’s impact on global oil demand will be much deeper than previously anticipated, saying world oil consumption will decline by -1.1 million bpd this year, a larger drop than a previous estimate of -420,000 bpd.

The outlook for higher US crude output is negative for oil prices.  The Department of Energy (DOE) on Tuesday raised its US 2026 crude production estimate to 13.78 million bpd from a June estimate of 13.72 million bpd.

Crude prices have support from the continued Ukrainian drone attacks on Russian oil infrastructure.  According to EA Analytics, Russian crude-processing rates averaged 4.32 million bpd in the first 10 days of June, the lowest in 20 years, amid damage to Russian energy infrastructure caused by drone and missile attacks from Ukraine.  According to Bloomberg, Ukrainian forces have attacked Russian fuel-producing facilities more than 50 times this year, compared with 82 for all of 2025.  As of the end of June, around 90% of Russian regions have imposed some form of fuel rationing or reported supply issues, as refining capacity has plunged following damage to facilities. 

As a bearish factor for crude, OPEC delegates said on May 14 that the cartel aims to continue a series of oil quota increases over the next few months, completing the return of halted oil production by the end of September.  The group already formally agreed to restore about two-thirds of the 1.65 million bpd supply cutback it made back in 2023 and said it plans to raise output targets further and to revive the final portion in three more monthly stages.  On Sunday, OPEC+ said it will boost its crude output by 188,000 bpd in August, though that increase might prove difficult, as Middle East producers are still restarting output curtailed by the war in the Region.  OPEC’s June crude production rose by +2.34 million bpd to 18.75 million bpd. 

Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least 7 days rose +39% w/w to 112.1 million bbl in the week ended July 3.

The consensus is that Wednesday’s weekly EIA crude inventories fell by -1.9 million bbl, and gasoline supplies fell by -1.72 million bbl. 

Last Wednesday’s EIA report showed that (1) US crude oil inventories as of June 26 were -7.0% below the seasonal 5-year average, (2) gasoline inventories were -6.5% below the seasonal 5-year average, and (3) distillate inventories were -7.2% below the 5-year seasonal average.  US crude oil production in the week ending June 26 fell -0.1% w/w to 13.81 million bpd, mildly below the record high of 13.862 million bpd posted in the week of November 7.

Baker Hughes reported last Thursday that the number of active US oil rigs in the week ended July 3 rose by +5 rigs to a 13-month high of 445 rigs, up from the 4.25-year low of 406 rigs posted in December 2025.  However, the number of US oil rigs remains sharply below the 5.5-year high of 627 reported in December 2022.