The session captured a market still trading headline to headline rather than settling on a direction. Early upside from the Bab al-Mandeb attack was pared entirely once Qatari and Pakistani officials pointed to progress on Oman-Iran talks, only for both benchmarks to reverse again on confirmation that US forces had fired on a vessel attempting to breach the Iranian port blockade. That both crude grades closed well inside the session range, rather than at the extremes, suggests traders are no longer willing to chase either the escalation or de-escalation story to its logical conclusion. Iran’s explicit statement that Hormuz stays shut regardless of any Oman-brokered arrangement removes some of the near-term optimism priced in on Monday, and with shipping traffic through the strait running at roughly half its recent average, the physical market remains far tighter than the headline volatility alone would suggest.
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More:
- Oil price prediction: Crude holds above $82 as bulls target a breakout past $82.55
- Oil: Private survey of inventory shows a huge headline crude oil build vs draw expected
- EIA raises crude oil price forecasts as Middle East supply risks tighten outlook
- Pakistani minister comments weigh on oil
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Iran just told the market that even a deal with Oman would not reopen Hormuz, and that is a bigger problem than any single day’s price swing.
Summary:
- WTI and Brent settled higher in a choppy session, with Brent closing around $89 and WTI around $83, both roughly $1 firmer on the day and the highest closes for both benchmarks since 31 July for a second straight session
- Intraday, Brent and WTI peaked near $90 and $85 respectively after Houthi rebels attacked a Saudi vessel near Bab al-Mandeb, before paring all gains to lows near $87 and $81 on constructive Qatari and Pakistani comments on Oman-Iran talks
- Prices reversed higher again after the Wall Street Journal, citing a US official, reported American forces fired on a Panama-flagged ship attempting to breach the US blockade of Iranian ports
- Iran’s newly appointed national security secretary said the Strait of Hormuz will remain closed until the US changes its behaviour and meets Iran’s conditions, even if Oman-brokered talks progress
- Shipping traffic through Hormuz has fallen to roughly six vessels, down from a circa 11-vessel recent average and far below the 125 to 140 vessels a day seen before the war, with around a fifth of global oil supply normally transiting the strait
- The EIA said some Middle Eastern producers are likely to struggle restoring output to pre-conflict levels even by the end of 2027
- Libya’s National Oil Corporation warned it could declare force majeure if drone attacks on energy assets in Zawiya continue, while Ukraine’s military said it struck an oil refinery in the Russian city of Orsk
- Brent is up circa 44% so far this year; analysts estimate a modest crude draw of around half a million barrels for the week to 7 August, with API and EIA inventory data due Tuesday and Wednesday respectively
- Attention now turns to US CPI on Wednesday as the next major macro catalyst
Crude oil settled higher on Tuesday after a choppy session in which Middle East headlines dominated an otherwise quiet day of trade, with both benchmarks posting their highest closes since 31 July for a second consecutive session. Brent futures rose by around $1 to settle near $89 a barrel, while WTI added a similar amount to close around $83, extending Monday’s roughly 5% jump that had come as hopes for a swift US-Iran peace deal began to fade.
The session’s direction shifted repeatedly. Prices first pushed higher, with Brent and WTI touching intraday peaks near $90 and $85 respectively, after Yemen’s Houthi rebels attacked a Saudi vessel carrying military equipment near the Bab al-Mandeb strait. That upside was then erased entirely on more constructive signals from mediators: Qatar’s foreign ministry said talks between Oman and Iran over the strait had reached an advanced stage, while Pakistan’s defence minister suggested the US and Iran were close to some form of agreement and that the broader situation was moving toward peace. Both benchmarks slipped to session lows near $87 and $81 on that news, before reversing higher once again after the Wall Street Journal, citing a US official, reported that American forces had fired on a Panama flagged vessel attempting to run the US blockade of Iranian ports early Tuesday.
Adding a harder edge to the day’s volatility, Iran’s newly appointed Supreme National Security Council secretary, Mohsen Rezaei, said the Strait of Hormuz will remain closed until the US changes its behaviour and accepts Iran’s conditions to end the war, regardless of any separate arrangement reached through Oman. Shipping data showed traffic through the strait has fallen to roughly six vessels, well below a recent average closer to eleven and a fraction of the 125 to 140 vessels a day that transited before the conflict began. Around a fifth of global oil supply normally moves through the waterway. The EIA added that some regional producers are likely to struggle restoring output to pre-conflict levels even by the end of 2027.
Supply risk broadened beyond the Gulf. In Libya, renewed violence in Zawiya prompted the National Oil Corporation to warn it could declare force majeure if drone attacks on the city’s energy assets persist. In Europe, Ukraine’s military said it struck an oil refinery in the Russian city of Orsk, adding to a run of attacks on Russian energy infrastructure that, combined with the Iran war, has helped push Brent up around 44% so far this year.
Attention now shifts to inventory data, with the American Petroleum Institute reporting Tuesday (see link above for results) and the EIA on Wednesday. Analysts expect a modest draw of around half a million barrels for the week to 7 August, which would mark just the second drawdown in three weeks. Beyond the oil-specific data, Wednesday’s US CPI print looms as the next major test for the broader market, with the inflation trajectory likely to shape how much further room the Federal Reserve has to manoeuvre against a backdrop of an already tightly balanced physical crude market.
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Looking ahead to the CPI data, expectations:
This article was written by Eamonn Sheridan at investinglive.com.