Oil Bulls Take Control as Iran Deal Collapses and Hormuz Stays Restricted

That is not a reopening. It is a restricted supply system that has not regained momentum. Refineries need cargoes they can schedule, insure and receive on time. A diplomatic headline does not solve that problem. Saudi Aramco resumed some loadings from inside the strait and offered cargoes through transfers off Fujairah. Chinese companies also began collecting crude outside the Gulf. Those moves helped prevent a complete supply breakdown.… The Strait of Hormuz remains the whole trade. Before the war, about one-fifth of global oil and liquefied natural gas consumption moved through the waterway. This week, shipping traffic remained in the single digits. Kpler data showed five commodity vessels passed through the strait Saturday and none were registered Sunday. By Tuesday, traffic had fallen to six vessels from nine the prior day. Wednesday’s shipping report showed no improvement. October WTI crude oil futures are trading at $86.31 late Thursday, up $4.82 or 5.91% for the week. The contract opened at $81.62, traded as low as $80.80, and reached $87.69. Friday’s session is still ahead, so the weekly result is not final. The market has already made its decision about the week. WTI rallied because the agreement traders were waiting for never appeared. The Strait of Hormuz is still operating far below normal. The ceasefire is finished. No talks are scheduled. Washington and Tehran are moving farther apart, not closer together. October WTI crude oil futures are trading at $86.31 late Thursday, up $4.82 or 5.91% for the week. The contract opened at $81.62, traded as low as $80.80, and reached $87.69. Friday’s session is still ahead, so the weekly result is not final. The market has already made its decision about the week. WTI rallied because the agreement traders were waiting for never appeared. The Strait of Hormuz is still operating far below normal. The ceasefire is finished. No talks are scheduled. Washington and Tehran are moving farther apart, not closer together. Hormuz Traffic Is Still the Problem The Strait of Hormuz remains the whole trade. Before the war, about one-fifth of global oil and liquefied natural gas consumption moved through the waterway. This week, shipping traffic remained in the single digits. Kpler data showed five commodity vessels passed through the strait Saturday and none were registered Sunday. By Tuesday, traffic had fallen to six vessels from nine the prior day. Wednesday’s shipping report showed no improvement. That is not a reopening. It is a restricted supply system that has not regained momentum. Refineries need cargoes they can schedule, insure and receive on time. A diplomatic headline does not solve that problem. Saudi Aramco resumed some loadings from inside the strait and offered cargoes through transfers off Fujairah. Chinese companies also began collecting crude outside the Gulf. Those moves helped prevent a complete supply breakdown. They did not restore normal flows. The Diplomatic Trade Broke Down Trump said Tuesday that no talks with Iran were taking place or scheduled. Iran said the Strait of Hormuz would remain shut until Washington met the conditions of the interim agreement. The temporary ceasefire expired Monday. The UAE then suspended all financial and economic transactions with Iran until further notice. That matters because the UAE is a major Gulf producer with export routes that have become more important while Hormuz remains restricted. Trump added to the pressure Wednesday by warning of economic consequences for any country providing Iran with a lifeline. Treasury Secretary Scott Bessent said he will outline planned actions against Iran on Monday. The market is now watching sanctions and economic pressure as closely as military activity. Supply Is Moving, but Nobody Knows How Much Supply has not stopped moving. It has become harder to measure. Some Gulf producers are moving more crude through Fujairah and Saudi Arabia’s Red Sea coast. More vessels are also operating without normal tracking signals while passing through Hormuz and the Bab el-Mandeb Strait. That keeps some barrels moving. It also makes the physical market harder to read. Traders know Middle East exports are below normal. They do not know how much crude is reaching refiners through alternate routes and untracked cargoes. That uncertainty is keeping the premium in WTI and Brent. There is enough supply moving to prevent panic. There is not enough clear evidence to let sellers take the premium out. The Inventory Report Gave Bears One Number The Energy Information Administration gave the bears a number Wednesday. U.S. crude inventories rose by 4.4 million barrels to 428.8 million barrels. A crude build tells traders that more oil is available in the United States than expected. It gave sellers a domestic supply figure after WTI had already rallied for several sessions. The market moved past it because distillate inventories fell for a third straight week. Diesel and heating oil remain tight while Middle East crude and refined-product flows are disrupted. U.S. refinery utilization rose to 97.2%, showing refiners are running hard to capture strong fuel margins. The United States added crude to storage. The product market remained tight. That is why the crude build did not break the rally. The Week Built a Premium, Not a Panic WTI gained more than $2 Monday as the diplomatic situation deteriorated. Tuesday’s gains were smaller as traders weighed restricted shipping against supply workarounds. Wednesday brought another push higher as the UAE cut ties with Iran. Thursday delivered the biggest move after Washington raised the threat of economic action. This is not the panic trade from the first days of the war. Some oil is still getting out. But the Strait has not reopened, the talks have failed and the disruption is lasting longer than traders expected. The bulls have restricted traffic, no diplomatic path and tighter distillate inventories. The bears have alternate routes and the U.S. crude build. The bulls had the stronger argument through Thursday. Weekly Light Crude Oil Futures Technical Analysis Trend Indicator Analysis October WTI crude oil futures are trading higher for the week and in a position to extend those gains beyond the July top at $88.07. Trade through this level will break the pattern of lower tops and change the main trend to up for the first time since the week-ending June 19. A trade through $73.10 will signal a resumption of the downtrend. For longer-term traders, the focus should be on the 52-week moving average at $69.21, which has been supporting the rally since late February. Weekly Technical Forecast The direction of the Weekly October Crude Oil futures contract for the week-ending August 28 is likely to be determined by trader reaction to $88.07. Bullish Scenario A sustained move above $88.07 will signal the presence of strong buyers. This will put the market in a position to extend the gains into the May swing top at $91.27. This is potential resistance and a potential trigger point for an acceleration to the upside. The next target will be the psychological $100.00 level. Bearish Scenario A sustained move under $88.07 will indicate the presence of sellers. The first area of focus will be the retracement zone at $82.05 to $79.20. If the latter fails then look for the selling to possibly extend into the swing bottom at $73.10. Major support comes in precisely under $73.10 so new buyers may step in on a test of long-term retracement zone support at $73.40 to $69.21 and the 52-week moving average at $69.21. Weekly Outlook WTI enters Friday higher because the market stopped waiting for a deal that is not coming. Another attack, new restriction or further decline in Hormuz traffic can bring fresh buying into the market quickly. Bessent’s planned announcement on Iran Monday also leaves the weekend with headline risk. The bearish argument depends on proof that supply is adapting. If shipping data begins to show a real recovery in vessel traffic, the premium can come out quickly. For now, traffic is restricted. The ceasefire is over. The talks are dead. Friday decides the weekly close. The physical supply issue will decide what happens after it. Technically, trader reaction to $88.07 could set the tone next week.