Uncertainty Over Reopening of Strait of Hormuz Lifts Crude Prices

Uncertainty Over Reopening of Strait of Hormuz Lifts Crude Prices

Fri, August 7, 2026 at 10:13 PM GMT+3 4 min read

• RB=F +1.59%

September WTI crude oil (CLU26) closed up +0.89 (+1.15%) on Friday, and September RBOB gasoline (RBU26) closed up +0.0468 (+1.59%).

Crude oil and gasoline prices settled higher on Friday, supported by a decline in the dollar ($DXY) to a 7-week low. Also, uncertainty regarding a proposed plan by Iran and Oman to reopen the Strait of Hormuz is boosting crude prices.

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The oil market is monitoring progress toward a deal between Iran and Oman to partially restore shipping through the Strait of Hormuz. A joint statement from the two countries is under review, and the route would remain active for two to four months, though the agreement does not mean a full reopening, according to Iranian officials. Iran said that a normalization of the strait will depend on the US lifting its blockade on Iranian ports.

Gains in crude oil are limited after President Trump said negotiations between Iran and Oman over the Strait of Hormuz are "moving along." However, the Wall Street Journal reported that Arab negotiators are concerned that Iran's diplomats may not be able to guarantee compliance with any agreement reached, as Iran's lead negotiators are under pressure from hardline officials to eke out more explicit references to Iran's role in the strait and clearer benefits. On Thursday, Iran's semi-official Fars news agency reported that vessels belonging to the US, Israel, or any other nation that has "caused damage" to Iran would be prohibited from the Strait of Hormuz under the proposed deal with Oman to reopen the waterway, which would restrict some oil exports from several Gulf States.

Crude prices also have support on concerns about oil supplies from the Middle East after Yemen's Houthi rebels said they targeted a Saudi oil tanker with a ballistic missile on Thursday in the Gulf of Aden. The Houthis said they will escalate attacks on Saudi oil tankers in the northern Red Sea to prevent them from transiting the area.

Crude prices also 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.

Robust crude supplies in China may reduce Chinese crude purchases in the near term, a bearish factor for oil prices. China's crude inventories remain abundant, with supplies falling by only 54 million bbl since early May to around 1.2 billion bbl, according to data from Kpler.

Stronger Russian crude exports are also adding to global oil supplies, which is bearish for prices. Data compiled by Bloomberg show the four-week average of Russian crude exports remains above 4 million bpd in the period to July 26 and rose to 4.13 million bpd through June 28, the highest since Russia invaded Ukraine in 2022. 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 Sunday 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 rose +4.6% w/w to 112164 million bbl in the week ended July 31.

Wednesday's EIA report showed that (1) US crude oil inventories as of July 31 were -6.2% below the seasonal 5-year average, (2) gasoline inventories were -6.2% below the seasonal 5-year average, and (3) distillate inventories were -11.7% below the 5-year seasonal average. US crude oil production in the week ending July 31 rose +0.1% w/w at 13.804 million bpd, just below the record high of 13.862 million bpd posted in the week of November 7.

Baker Hughes reported 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.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com