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Crude Prices Retreat as Hormuz Uncertainty Persists, Product Markets Tighten, EBW Says

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Crude prices are likely to see a moderate near-term rebound as markets weigh uncertainty over the reopening of the Strait of Hormuz against weak long-term fundamentals, while tighter gasoline and diesel markets could provide support, EBW AnalyticsGroup strategists said in a note on Monday.

EBW analysts said that US crude futures have fallen sharply in recent weeks, with the September NYMEX contract settling at $78.18 per barrel on Friday, down $6.49, or 7.7%, from the previous week.

The consultancy said crude could initially move higher as markets reassess the outlook for Hormuz, but weak structural fundamentals, softer inventory draws and bearish technical signals suggest the recent downtrend is likely to resume.

"Near-term pricing may test higher, but weak long-term structural prospects, slackened inventory draws, and bearish technicals suggest a probability of only a moderate bounce before the recent downtrend extends lower," EBW said.

The outlook has been complicated by uncertainty over efforts to reopen the Strait, one of the world's key energy chokepoints.

EBW said that remarks from US officials had raised hopes of a deal, but Iran reiterated maximalist demands over the weekend, keeping the standoff unresolved.

The latest US Energy Information Administration data offered an unusually large statistical discrepancy. The consultancy said that though the headline showed a 2.6 million-barrel increase in inventories, calculation of the underlying components indicated a 13.3 million-barrel draw, driven in part by record crude exports of 5.1 million barrels per day.

EBW said that the 15.9 million-barrel gap between the two measures was the largest in at least a decade.

On the refined products side, while crude faces pressure, refined products are showing more resilience.

The Russia-Ukraine war remains a potentially significant source of disruption to global gasoline and diesel markets. Russia's restrictions on gasoline and diesel exports through January 2027, combined with lower Chinese product exports, are creating structural tightness that could prove difficult to resolve quickly.

Meanwhile, US natural gas prices are facing a more immediate bearish outlook. The September NYMEX contract fell 8.5 cents last week to fresh five-year lows, while the January 2027 contract dropped 19.6 cents through Thursday's low.

The September contract closed Friday at $2.66 per million British thermal units, while Henry Hub spot gas averaged only $2.64 last week and $2.55 on Friday, EBW said.

The consultancy attributed the pressure to deteriorating mid-to-late August weather forecasts and a bearish EIA storage report. Winter contracts also came under pressure, with January briefly falling below $4 per MMBtu.

US natural gas inventories are expected to rise by 2 million to 5 million barrels equivalent during the week, with storage targeted at 402 billion to 405 billion cubic feet. EBW sees the end-August inventory level at 390 billion to 400 billion cubic feet.

The consultancy said that the storage surplus relative to the five-year average has reached about 195 billion cubic feet, leaving little time for strong summer demand to materially reduce the excess.

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