Volatility in the oil market during today's session is quite high, which is related to the constant appearance of new conflicting information. Brent oil prices returned to around $88 per barrel, and the vision of a rise towards $100 is becoming increasingly real, given the tight fundamentals and today's test of the $90 level. Conflicting diplomatic reports, new acts of aggression in the Middle East, and logistical bottlenecks in Europe are pumping volatility again, although it is clear that essentially no one wants a final escalation of the situation from the current point.
Diplomatic impasse around the Strait of Hormuz
Despite optimistic declarations from the Pakistani Ministry of Foreign Affairs about an allegedly imminent agreement, the situation around the key chokepoint is hardening. Donald Trump demanded compensation from Tehran for decades of conflict. In response, advisors to Iran's supreme leader stated that the Strait of Hormuz will remain closed until the US lifts the maritime blockade, unblocks assets, and military actions in the region end. What is the effect? In the first ten days of August, not a single VLCC supertanker sailed from the Iranian port of Kharg. It is also worth mentioning that media reports appeared indicating that Iran suggested it might wait until 2029 for negotiations to open the Strait of Hormuz, which is until the end of Donald Trump's term.
Intensification of fighting and logistical paralysis
Shelling of infrastructure and trade routes is taking an increasing toll:
- Yemen and the Red Sea: Houthis paralyzed the Aramco refinery in Jazan (400,000 b/d), taking it out of use until September, and struck more merchant ships, causing fatalities among tanker crews.
- Libya and refinery paralysis: Libya's NOC declared force majeure after a drone attack on the Zawiya refinery.
Dwindling inventories in Asia and OPEC response
Despite blockades, OPEC production rose in July by 1.17 million b/d to 19.9 million b/d (mainly due to Iraq and Kuwait). Meanwhile, oil inventories in China's Shandong province were depleted by as much as 35 million barrels in July (a drop of 1.1 million b/d). Chinese independent refineries (teapots) are preparing for aggressive purchases of crude from Iran and Russia as soon as the routes become clear.
Oil prices are currently continuing their upward trend, although we also saw an attempt at reduction during the day. Closing above or below the 61.8 retracement of the entire recent upward impulse related to the war may provide momentum for the movement in subsequent sessions. Source: xStation5
Daily Summary - Oil gains due to uncertainty, market awaits inflation data
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