Oil News: Can WTI and Brent Extend the Rally as Hormuz Supply Risk Persists?

Hormuz and the Red Sea remain the two routes that control whether the supply-risk premium holds into next week.

WTI gained 10.64% and Brent rose 11.83% last week as Middle East shipping risk tightened the crude oil outlook.

Diplomacy can cut oil prices quickly, but only normal tanker traffic and lower insurance costs can erase the premium.

Brent went from the mid-$80s to above $100 and WTI ran from $80 to above $92 after the shipping problem jumped from Hormuz into the Red Sea. The Houthis went after Saudi tankers near Bab el-Mandeb the same week Iran’s Revolutionary Guards told the market no ship enters or leaves Hormuz without their coordination.

Two exits impaired at the same time is what produced a 10%-plus weekly rally and neither one has reopened.

September WTI crude oil futures settled last week at $90.47, up $8.70 or +10.64%. September Brent crude oil futures settled at $102.00, up $10.44 or +11.83%.

Yanbu and the Red Sea were supposed to be the answer when Hormuz went bad. That lasted until the Houthis started hitting Saudi tankers near Bab el-Mandeb and the weekend brought more reports of attacks on Saudi oil sites with no sign the shipping risk is easing.

JODI data showed Saudi exports were already falling for three straight months before the blockade even started. The kingdom has the spare capacity but right now it is stuck behind two chokepoints and the market is pricing that reality, not the barrels sitting in the ground.

Refiners are chasing barrels from every other source they can find. North Sea, West African and Mediterranean grades are all getting bid up as Middle East deliveries slow down.

Aramco is offering cargoes through Egypt’s Sidi Kerir terminal but that adds time, adds cost and the biggest tankers cannot move fully loaded through every alternative.

Diesel margins are still running near record levels and refiners are not going to stop buying crude when the fuel market is paying them to run hard.

Russian crude discounts that were giving Indian refiners some relief earlier this month have disappeared. Every alternative barrel is now priced like a scarce barrel.

Pakistan and China reportedly explored restarting U.S.-Iran talks late last week and that was enough to trigger profit-taking after the run. The selling made sense after five straight sessions of gains but nobody who sold Friday was betting that Hormuz reopens next week.

The U.S. completed a thirteenth consecutive night of strikes on Iranian targets the same day the diplomatic headline hit. Trump said he is close to deciding on a massive attack. Rubio called the approach a head for an eye.

The market has seen this pattern before. A diplomatic headline knocks crude lower for a session, the military keeps striking overnight and the premium rebuilds by the following morning. Sellers who press this market lower have to hold through the risk of another tanker attack, confirmed damage to Saudi export infrastructure or a broader U.S. operation over the weekend.

One headline brought the selling Friday. One headline can bring the buying back Monday.

September crude oil futures finished sharply higher last week. After finding support at the 52-week moving average during the week ending July 3, the market overcame a pair of retracement zones and ...