Iran Sanctions and Slower Hormuz Traffic Push Oil Higher

Oil prices moved higher again this week as tanker traffic through the Strait of Hormuz slowed and proposed new U.S. economic sanctions on Iran added to already elevated geopolitical tensions.

Another increase in U.S. commercial crude inventories was overshadowed by continued Strategic Petroleum Reserve drawdowns and higher refinery utilization, while natural gas prices edged higher despite another increase in production.

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Oil

Fundamental Analysis

Crude prices stair-stepped higher this week as tanker shipments through the Strait of Hormuz slowed once again and as Iran continued to indicate that it intends to permanently operate the key bottleneck. Proposed new economic sanctions on Iran by the U.S. heightened tensions as well.

Another large increase in commercial oil inventories was overshadowed by continuing drawdowns in the Strategic Petroleum Reserve and increased refinery utilization.

WTI's high was Wednesday's $87.70/bbl for September, while the low was Monday's $80.80. October Brent crude hit its high Thursday at $94.70/bbl, with the low Monday at $88.00. Both grades settled higher on the week. The WTI/Brent spread widened to $7.10.

The September WTI futures contract expired Thursday, bringing October to the forefront on Friday.

President Trump announced a shift in the U.S. approach toward Iran from military action to sweeping economic sanctions that would also include those conducting business with Iran. China is currently the largest importer of Iranian crude.

Traders view the sanctions as potentially hardening Iran's position, which could lead to further restrictions on passage through the Strait of Hormuz and additional attacks on neighboring countries. The U.S./Iran 60-day memorandum of understanding signed June 17 expired this week without an agreed settlement.

Iran has continued talks with Oman regarding joint operation of the Strait of Hormuz. Despite U.S. claims of control over the Strait, only one or two tankers per day are getting through, carrying an estimated 2.0 million barrels per day compared with approximately 4.0 million barrels per day in July.

Iraq is seeking to increase its production from the current 2.9 million barrels per day but will require both OPEC approval and new routes to deliver additional shipments. Venezuela's production has climbed to 1.25 million barrels per day, with U.S. refiners receiving approximately 500,000 barrels per day.

U.S. Petroleum Snapshot

The Energy Information Administration's Weekly Petroleum Status Report indicated that commercial crude oil inventories increased 4.4 million barrels to 429 million barrels, approximately in line with the five-year average.

Gasoline inventories increased 690,000 barrels to 209.8 million barrels and remain 5% below the five-year average. Distillate inventories decreased 1.5 million barrels to 105.6 million barrels and remain 13% below the five-year average.

Refinery utilization increased to 97.2%, compared with 96.2% the previous week, while crude inputs rose to approximately 17.4 million barrels per day.

Gasoline demand was 8.7 million barrels per day compared with 8.96 million barrels per day the previous week. Crude imports were 6.6 million barrels per day, while crude exports increased to 4.1 million barrels per day.

The Strategic Petroleum Reserve declined another 5.3 million barrels to 293 million barrels, its lowest level since 1983. Stocks at Cushing, Oklahoma decreased 1.3 million barrels to 21.3 million barrels, or approximately 29% of capacity.

U.S. crude production remained at 13.8 million barrels per day. The U.S. oil and gas rig count declined by five to 588, compared with 538 last year.

Gasoline prices reached $4.11 per gallon, up $0.03 from the previous week and $0.97 from a year earlier. Diesel crack spreads also moved above $100 per barrel, an all-time high, as refining capacity worldwide remains constrained.

Oil – Technical Analysis

October WTI NYMEX futures are trading above the 8-, 13- and 20-day moving averages and near the upper Bollinger Band limit. Volume is below the recent average at approximately 175,000 contracts. The Relative Strength Indicator is overbought at 65.

Oil – Looking Ahead

Only time will tell whether the new economic sanctions on Iran will persuade the country to reopen the Strait of Hormuz and return to the negotiating table.

The U.S. naval blockade in the region has stifled shipments of Iranian crude while Iran is running out of storage capacity. Traders will be watching closely for any definitive arrangement between Iran and Oman to administer the Strait and, if completed, how the U.S. responds.

Given the worldwide shortage of refined products, U.S. refineries are expected to continue operating at elevated utilization rates beyond Labor Day weekend.

Refineries may also begin producing winter-blend fuels earlier than normal, although the turnaround period required to make that adjustment could temporarily remove considerable refining capacity from service.

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Natural Gas

Fundamental Analysis

September NYMEX Henry Hub natural gas futures were only slightly higher this week despite increased power generation from hotter weather, as natural gas production increased again.

A smaller-than-forecast storage injection caused prices to spike Wednesday before they fell back by the end of the week. The week's high was approximately $2.875/MMBtu, while the low was Monday's $2.64. The Henry Hub contract remains in a six-week downtrend.

Natural gas demand this week was estimated at approximately 115 Bcfd, with power consumption increasing by 2.4 Bcfd. Supply was estimated at 116–117 Bcfd.

LNG exports were approximately 17.0 Bcf, while exports to Mexico increased to 9–10 Bcfd.

International natural gas markets remain significantly stronger. U.K. NBP natural gas was most recently at $22.30/MMBtu, Dutch TTF futures were $22.40/MMBtu and Asia's JKM was quoted at $22.60/MMBtu as Asian and European markets continue competing for LNG shipments. The U.S. has also become the largest supplier of LNG to Japan.

The EIA's Weekly Natural Gas Storage Report indicated an injection of 16 Bcf compared with a forecast of 36 Bcf and a five-year average of 29 Bcf.

Total natural gas in storage now stands at 3.169 Tcf, 0.9% below last year but 6.2% above the five-year average.

Natural Gas – Technical Analysis

September 2026 NYMEX Henry Hub natural gas futures are trading around the 8-, 13- and 20-day moving averages. Volume is approximately in line with the recent average at 100,000 contracts. The RSI is neutral at 47.

Natural Gas – Looking Ahead

The 8–14-day forecast looks favorable for natural gas-fired generation across much of the U.S. as record-high temperatures continue across Southern tier states.

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. The EIA is currently projecting storage to reach approximately 4.0 Tcf before winter.

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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.