Renewed U.S.-Iran Hostilities Push Oil Prices Higher

Oil prices rallied this week as renewed U.S. attacks on Iran were followed by Iranian attacks on neighboring petrostates, pushing crude prices back to levels last seen in mid-June.

A larger-than-expected decline in U.S. commercial crude inventories and further withdrawals from the Strategic Petroleum Reserve added momentum to the rally, while a newly announced agreement involving Venezuelan oil reserves had little apparent impact on near-term market sentiment.

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Oil

Fundamental Analysis

Renewed U.S. attacks on Iran, followed by Iranian attacks on neighboring petrostates, rallied crude prices this week to mid-June levels. A larger-than-expected commercial inventory draw added momentum to the rally, as did further declines in the Strategic Petroleum Reserve.

A newly announced deal involving oil reserves in Venezuela was expected to provide some bearish sentiment, but traders largely ignored its potential impact on near-term supplies.

WTI's high was Thursday's $93.15/bbl for October, while the low was Monday's $84.10. October Brent crude also hit its high Thursday at $97.60/bbl, with the low Monday at $89.05. Both grades settled much higher on the week. The WTI/Brent spread tightened to $4.60.

The U.S. struck several Iranian targets early in the week, including rocket launchers on Larak Island. Iran subsequently hit two oil tankers attempting passage through the Strait of Hormuz near Oman and attacked U.S. military bases in Jordan as well as the U.S.-allied countries of Kuwait, Bahrain, Iraq and the U.A.E.

Reports of actual oil shipments through the Strait of Hormuz remain conflicting. The U.S. government has stated that as much as 18 million barrels per day may be moving through with Navy escorts, while tanker-tracking companies have confirmed approximately 6–8 million barrels per day traversing the Strait.

The Trump Administration also announced an agreement to acquire roughly 65 billion barrels of oil reserves in Venezuela. The proposal involves a joint venture with a private company to develop 17 different fields, with the Department of Defense retaining a stake.

Any first oil from the project would still be several years away given the current condition of Venezuela's oil infrastructure. Chevron, meanwhile, has pledged to invest $7 billion in Venezuela to double its current production.

President Trump also met with major U.S. refiners, encouraging them to lower prices and build new refining capacity. Lower prices remain largely market-driven, while construction of additional refining capacity would take years and would not affect gasoline or diesel prices in the near term.

The Strategic Petroleum Reserve continues to be drawn down as part of the IEA's call for member countries to use strategic reserves to offset volumes disrupted from the Persian Gulf. The U.S. pledged 172 million barrels and has approximately 39 million barrels remaining to deliver.

U.S. Petroleum Snapshot

The Energy Information Administration's Weekly Petroleum Status Report indicated that commercial crude oil inventories decreased 4.5 million barrels to 424.5 million barrels, approximately 1% above the five-year average.

Gasoline inventories decreased 1.2 million barrels to 206 million barrels and remain 6% below the five-year average. Distillate inventories increased 800,000 barrels to 104 million barrels but remain 14% below the five-year average.

Refinery utilization increased to 98%, compared with 97.4% the previous week, while crude inputs increased to approximately 17.5 million barrels per day.

Gasoline demand was 8.9 million barrels per day compared with 9.0 million barrels per day the previous week. Crude imports increased to 6.8 million barrels per day, while crude exports increased to 4.5 million barrels per day.

The Strategic Petroleum Reserve declined another 3.1 million barrels to 286.6 million barrels, its lowest level since 1982. Stocks at Cushing, Oklahoma increased by approximately 80,000 barrels to 22.5 million barrels, or about 30% of capacity.

U.S. crude production remained at 13.8 million barrels per day. The U.S. oil and gas rig count was unchanged at 588.

Gasoline prices reached $4.15 per gallon, up $0.06 from the previous week and $0.95 from a year earlier. The national average remained above $4.00 per gallon every day during August. Diesel prices reached an all-time high of $5.85 per gallon and are now up 64% this year.

Oil – Technical Analysis

October WTI NYMEX futures moved past the upper Bollinger Band this week and well into overbought territory during the war-related rally. Prices are above the 8-, 13- and 20-day moving averages.

Volume is below the recent average at approximately 200,000 contracts. The Relative Strength Indicator is very overbought at 67.

Oil – Looking Ahead

Oil is moving through the Strait of Hormuz, although there continues to be considerable disagreement over how much. There was little mention of peace talks this week, and renewed negotiations may be necessary to bring prices lower.

U.S. refineries have been operating at very high rates this summer, reaching 98% utilization last week. Traditionally, the period from mid-September through mid-November is used for refinery maintenance and the transition to winter-blend gasoline.

Given record-high diesel prices and crack spreads, the amount of actual refinery downtime this fall will be important to watch.

The same high-pressure system bringing record heat to much of the country is also suppressing tropical storm development in the Atlantic. The resulting wind shear has limited further development and helped steer tropical systems away from the U.S., even as September begins what is traditionally the most active period for hurricane formation.

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Natural Gas

Fundamental Analysis

October NYMEX Henry Hub natural gas futures gained this week as continuing hot weather and a smaller-than-forecast storage injection provided support.

The week's high was Thursday's $3.03/MMBtu, while the low was Monday's $2.83.

Natural gas demand this week was estimated at approximately 115 Bcfd, with power consumption decreasing by 2.3 Bcfd. Supply was estimated at approximately 120 Bcfd.

LNG exports were approximately 18.2 Bcf, while exports to Mexico were 7.6 Bcfd.

European natural gas storage is approximately 66% full, its lowest level for this time of year in almost 20 years. Buyers were reluctant to pay war-induced high prices throughout the summer but now face increasing pressure to secure supply, while Persian Gulf LNG volumes have yet to return to pre-war levels.

U.K. NBP natural gas was most recently at $22.10/MMBtu, Dutch TTF futures were considerably higher at $24.50/MMBtu and Asia's JKM was quoted at $24.10/MMBtu as Asian and European markets continue competing for LNG shipments.

The EIA's Weekly Natural Gas Storage Report indicated an injection of 30 Bcf compared with a forecast of 31 Bcf and a five-year average of 37 Bcf.

Total natural gas in storage now stands at 3.214 Tcf, 1.5% below last year but 5.2% above the five-year average.

Natural Gas – Technical Analysis

October 2026 NYMEX Henry Hub natural gas futures are trading above the 8-, 13- and 20-day moving averages. Volume is below the recent average at approximately 105,000 contracts. The RSI is neutral at 57.

Natural Gas – Looking Ahead

The 8–14-day forecast remains favorable for natural gas-fired generation across most of the U.S. as record-high temperatures persist after Labor Day.

Weekly storage injections should begin increasing as the market moves toward November 1. LNG exports are expected to remain strong given the storage situation in the U.K. and European Union.

Cheniere LNG has completed the Stage 3 expansion of its Corpus Christi facility, bringing the site to seven trains totaling 10 metric tons per year.

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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.