Crude Oil Prices Plunge as Supply Threats Ease

CommodityGeopolitics Impact 4
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Crude oil prices plunged on easing Middle East supply threats. September WTI crude fell 6.79% and September RBOB gasoline dropped 2.10% to a one-week low after the US and Iran held off on further attacks for a third day and Iran signaled it would refrain from retaliation while negotiating with Oman over the Strait of Hormuz. President Trump said the US paused Iran strikes to give peace talks a chance. However, tensions remain high as the US maintains its blockade of Iranian oil shipments in the Persian Gulf and Houthi militants claimed to have struck Saudi Aramco facilities in the Red Sea port towns of Jizan and Yanbu. Global crude supplies are tightening due to reduced flows through the Strait of Hormuz, with the International Maritime Organization warning it is too dangerous to cross and visible transit falling sharply as Iran targets tankers. Crude prices also have support from Ukraine intensifying drone attacks on Russian oil infrastructure, with Russian crude production falling to 8.928 million barrels per day in June, the lowest in two and a half years, and Russian crude-processing rates expected to average 3.51 million barrels per day in July, the lowest in 24 years. Around 90% of Russian regions have imposed fuel rationing or reported supply issues as refining capacity plunged, deepening a nationwide gasoline shortage and prompting a ban on almost all gasoline, jet fuel and diesel exports. Stronger Russian crude exports are adding to global oil supplies, with the four-week average rising to 4.13 million barrels per day through June 28, the highest since Russia invaded Ukraine in 2022. 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, and OPEC+ said on July 5 it will boost crude output by 188,000 barrels per day in August. OPEC’s June crude production rose by 2.34 million barrels per day to 18.75 million barrels per day. Vortexa reported that crude oil stored on stationary tankers rose 3.5% week-over-week to 102.84 million barrels in the week ended July 24. The EIA reported that US crude oil inventories as of July 17 were 5.3% below the seasonal five-year average, gasoline inventories were 7.1% below, and distillate inventories were 9.6% below. US crude oil production fell 0.5% week-over-week to 13.798 million barrels per day. Baker Hughes reported that the number of active US oil rigs fell by two to 450 rigs.

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Saudi AramcoPrivate▼ Negative
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Houthi militants claimed to have struck Saudi Aramco facilities

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