Crude Prices Undercut as Persian Gulf Tensions Ease Slightly

September WTI crude oil (CLU26) is down -0.83 (-1.00%), and September RBOB gasoline (RBU26) is down -0.0026 (-0.08%).

Crude oil and gasoline prices are trading lower, with no overnight reports of new military attacks by the US or Iran in the Persian Gulf.  Market concerns about the Middle East were also reduced slightly by news reports saying that the Trump administration is pivoting to using the naval blockade to apply economic pressure on Iran rather than new military attacks.

There are no reports of any progress between the US and Iran on an agreement to reopen the Strait of Hormuz, although some ships are still getting through by turning off their transponders and hoping for the best.

An Iranian military spokesperson said today that no ship can safely pass the Strait of Hormuz without Iran's authorization and supervision and that President Trump's claims of control over the Strait are "nothing more than lies." The Iranian statement was in response to President Trump's comment late Tuesday that the US has "total control over the Hormuz Strait" and that "we own it." 

Traffic through the Strait of Hormuz remains slow, tightening global crude supplies and boosting oil prices.  Energy Aspects said on Monday that only an average of five vessels are transiting through the Strait, down from 14 ships a day seen after the US and Iran reached a memorandum of understanding in June.

Oil prices are seeing some carryover pressure from Wednesday's EIA report, which showed a sharp weekly rise in US oil inventories.

In a supportive factor, the International Energy Agency (IEA) said in its monthly report, released on Wednesday, that the global oil supply deficit will worsen, even as oil demand is taking a hit from the war and high prices.  The IEA said global oil inventories will fall in Q3 at twice the previously estimated rate because of ongoing disruptions from the US-Iran war.

Crude prices have support as Ukraine intensifies drone attacks on Russian oil infrastructure.  Ukraine has attacked Russian refineries, oil tankers, and major pipeline infrastructure at least 30 times in July, the second-highest monthly number of attacks since the war began in 2022.  According to EA Analytics, Russian crude-processing rates will average 3.51 million bpd in July, the lowest in 24 years, amid damage to Russian energy infrastructure caused by drone and missile attacks from Ukraine.  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.  The strikes have deepened a nationwide gasoline shortage, with several major refineries shut down and the government banning almost all gasoline, jet fuel and diesel exports.  Russia is the world's number two diesel exporter, after the US, according to Vortexa. 

Stronger Russian crude exports are adding to global oil supplies, which is bearish for prices.  Russia may be boosting its crude exports as the country's refining capacity has plunged due to damage at its refining facilities from Ukraine's drone and missile attacks.

As a bearish factor for crude, OPEC delegates on August 2 approved their final increase of +188,000 bpd in crude production for September.  The group has now restored all of the 1.65 million bpd supply cutback it made back in 2023 and said it plans to hold output steady for the rest of the year after the September hike.  The production increases by OPEC+ might prove difficult to achieve amid renewed US-Iran military attacks in the region.  OPEC's July crude production rose by +1.16 million bpd to 19.44 million bpd. 

Vortexa reported on Monday that 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.

Wednesday's weekly EIA crude inventories rose by 17.4 million bbl, the largest increase in more than three years.  The increase was mainly due to a sharp drop in US crude oil exports.  Meanwhile, gasoline inventories fell by -968,000 barrels, slightly less than the expected -1.15 million bbl decline.

Wednesday's EIA report showed that (1) US crude oil inventories as of Aug 7 were -1.8% below the seasonal 5-year average, (2) gasoline inventories were -5.8% below the seasonal 5-year average, and (3) distillate inventories were -11.9% below the 5-year seasonal average.  US crude oil production in the week ending Aug 7 rose +0.01% w/w to 13.805 million bpd, just below the record high of 13.862 million bpd posted in the week of November 7, 2025.

Baker Hughes reported last Friday that the number of active US oil rigs in the week ended August 7 rose by +3 to a 14-month high of 454 rigs.