Hormuz Uncertainty Pushes Oil Prices Higher

Oil prices moved higher this week as tanker traffic through the Strait of Hormuz slowed again and uncertainty continued over who will ultimately control the key shipping route.

Markets largely looked past a surprisingly large increase in U.S. commercial crude inventories, while natural gas moved modestly higher as hotter weather and strong LNG exports supported demand.

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Oil

Fundamental Analysis

Crude prices are higher this week as tanker shipments through the Strait of Hormuz slow once again and as Iran continues to indicate it will permanently operate the key bottleneck. An unexpectedly large increase in commercial oil inventories was seemingly ignored by the markets this week, while the IEA forecasted both lower production and lower demand for this year.

WTI's high was Tuesday's $83.35/bbl for September, while the low was Monday's $76.80. October Brent crude hit its high Tuesday at $90.05/bbl, with the low Monday at $83.35. Both grades settled higher on the week. WTI is about $7.00 lower over the last three weeks, while the WTI/Brent spread has widened to $6.10.

Global crude oil prices moved higher this week as Iran increased attacks on ships attempting to traverse the Strait of Hormuz while the U.S. continued its blockade of Iranian vessels. Tanker tracker Kpler reports that about 11 ships per day are now successfully making passage compared with more than 100 per day before the conflict.

Iran continues to promote the idea of permanently controlling the Strait while charging administrative fees for passage. At the same time, the U.S. has claimed control of the Strait. This ongoing uncertainty continues to create significant day-to-day price volatility.

Persian Gulf producers are also looking for alternative routes and new projects to move crude oil, refined products and LNG out of the region. Saudi Arabia has increased production by more than 1 million barrels per day but has only been able to move an incremental 200,000 barrels per day, forcing it to store the remainder as disruptions continue around the Bab el-Mandeb Strait.

The IEA is forecasting an average decline in global oil production of 4.3 million barrels per day this year, resulting in a third-quarter 2026 deficit of 1.8 million barrels per day. At the same time, higher refined-product prices could contribute to 1.6 million barrels per day of demand destruction. OPEC sees a more moderate demand decline of about 580,000 barrels per day, while the EIA expects U.S. oil production to average a record 13.8 million barrels per day this year.

U.S. Petroleum Snapshot

The Energy Information Administration's Weekly Petroleum Status Report indicated that commercial crude oil inventories increased 17.4 million barrels to 424 million barrels, approximately 2% below the five-year average.

Gasoline inventories decreased 970,000 barrels to 209 million barrels and remain 6% below the five-year average. Distillate inventories were essentially unchanged at 107 million barrels and remain 12% below the five-year average.

Refinery utilization was 96.2%, compared with 96.5% the previous week.

U.S. crude production remained at 13.8 million barrels per day. The U.S. oil and gas rig count increased by five to 593, compared with 539 last year.

The Strategic Petroleum Reserve declined by 6.1 million barrels to 299 million barrels, its lowest level since 1983. Stocks at Cushing, Oklahoma increased 1.6 million barrels to 22.6 million barrels, or approximately 30% of capacity.

Gasoline prices reached $4.08 per gallon, up $0.36 from the previous week and $0.92 from a year earlier.

Oil – Technical Analysis

September WTI NYMEX futures are trading above the 8- and 13-day moving averages and near the 21-day moving average. Volume is below the recent average at approximately 155,000 contracts. The Relative Strength Indicator is neutral at 53.

Oil – Looking Ahead

While the U.S. and Iran debate who actually controls the Strait of Hormuz, Persian Gulf producers are looking for existing alternative routes and proposing entirely new projects.

Three to five years from now, a much smaller amount of crude oil and refined products may pass through the Strait, particularly if transit fees become permanent. In the short term, the level of attacks in the region and confirmed vessel traffic will remain key market drivers.

The overall demand picture will also begin to change as the peak summer travel season ends in approximately three weeks.

Phillips 66, Kinder Morgan and HF Sinclair also announced a $5 billion pipeline project that would deliver refined products from West Texas to California, which has lost two refineries this year.

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Natural Gas

Fundamental Analysis

Despite continuing production increases, hotter weather and peak LNG production boosted September NYMEX Henry Hub natural gas futures this week, although prices traded within a relatively tight $0.15 range.

The week's high was Wednesday's $2.85/MMBtu, while the low was Monday's $2.70. The Henry Hub contract remains in a five-week downtrend.

Natural gas demand this week was estimated at approximately 115 Bcfd as power consumption increased, while supply was estimated at 113 Bcfd.

LNG exports reached approximately 18.0 Bcf, while exports to Mexico declined to 6.0 Bcfd.

International gas markets remain significantly stronger. U.K. NBP natural gas was most recently at $20.17/MMBtu, Dutch TTF futures were $20.47/MMBtu and Asia's JKM was quoted at $21.20/MMBtu as Asian and European markets continue competing for LNG shipments.

The EIA's Weekly Natural Gas Storage Report indicated an injection of 36 Bcf compared with a forecast of 30 Bcf and a five-year average of 33 Bcf.

Total natural gas in storage now stands at 3.153 Tcf, 0.8% below last year but 6.7% above the five-year average.

Natural Gas – Technical Analysis

September 2026 NYMEX Henry Hub natural gas futures are trading below the 8-, 13- and 20-day moving averages and have breached the lower Bollinger Band limit.

Volume is approximately in line with the recent average at 105,000 contracts. The RSI is oversold at 35.

Natural Gas – Looking Ahead

The 8–14-day forecast looks favorable for natural gas-fired generation across most of the U.S.

While global LNG prices remain strong, the U.S. is currently exporting at maximum output. Supply surpluses are expected to continue, which should contribute to larger storage injections.

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Weekly Oil & Gas Commentary is provided for informational and educational purposes and should not be considered investment, trading or financial advice.