Crude Prices Sharply Lower as Oil Supplies Move Through Strait of Hormuz

October WTI crude oil (CLV26) closed down -2.05 (-2.35%) on Monday, and October RBOB gasoline (RBV26) closed down -0.0780 (-2.56%).

Crude oil and gasoline prices settled sharply lower on Monday on signs that crude supplies are moving through the Strait of Hormuz.  Also, Monday’s dollar strength weighed on energy prices. 

Crude prices were under pressure on Monday after Axios reported that about 40 tankers transited out of the Strait of Hormuz last Friday night, transporting around 16 million bbl of crude.  Also, the Joint Maritime Information Center cut the threat level for shipping in the Gulf of Oman to “moderate,” one step lower than the previous assessment.  The moderate assessment means the threat of attack on shipping off the coast of Oman is possible but not likely. 

US Treasury Secretary Scott Bessent on Monday said that the US announced a campaign to sever Iran from the global economy, warning that any country doing business with Iran risks facing US sanctions.  He said the US is focusing on five of Iran's "most vital lifelines," including digital assets, technology, gold, aviation, and shipping, and that countries will have a defined timeline to shut down economic cooperation with Iran; if they don't, the Treasury will act unilaterally. 

Iran's secretary of the Supreme National Security Council said Monday that "Iran will regard any country's participation in or support for America's economic war against the Iranian people as an act of war and not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere in the Persian Gulf."

President Trump has said that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.  Also, US Energy Secretary Chris Wright said that the US is playing the long game with Iran, implying the US has no plans to de-escalate the conflict, potentially limiting crude supplied from the Middle East.

Crude prices also have support amid fresh Israeli attacks on Iran-backed Hezbollah in Lebanon, dampening the prospects of ending hostilities in the Middle East and a quick reopening of the Strait of Hormuz.  In addition, Israel has struck Iran-backed Hamas in Gaza, the Yemen- based Houthis have attacked ships in the Red Sea, and several vessels have been hit by projectiles in the Strait of Hormuz.

In a supportive factor, the International Energy Agency (IEA) said in its monthly report, released on August 12, 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 averaged 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.  The attacks on Russian oil infrastructure knocked Russia’s crude production in July to 8.89 million bpd, the lowest in six years, according to secondary source estimates published by OPEC.

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 -11% w/w to 97.71 million bbl in the week ended August 21.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of Aug 14 were +0.3% above the seasonal 5-year average, (2) gasoline inventories were -5.3% below the seasonal 5-year average, and (3) distillate inventories were -12.7% below the 5-year seasonal average.  US crude oil production in the week ending Aug 14 rose +0.2% w/w to 13.83 million bpd, just below the record high of 13.862 million bpd posted in November 2025.

Baker Hughes reported last Friday that the number of active US oil rigs in the week ended August 21 fell by -3 to 452 rigs, falling back from the 1.25-year high of 455 rigs the week of August 14.