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US Oil Update: Crude Extends Gains for 3rd Consecutive Day

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Crude oil benchmarks gained for the third day on Tuesday, driven by a prolonged US-Iran diplomatic breakdown, continued Strait of Hormuz security threats, and record-high US diesel cracks.

Front-month West Texas Intermediate crude futures gained by 1% to $85.37 per barrel, while Brent futures edged up 0.3% to $91.09/bbl after touching its highest since late July earlier in the day.

"Sentiment remained supported by US President Donald Trump's decision not to extend the US-Iran peace agreement and continued security concerns in the Strait of Hormuz, raising fears of supply disruptions," ING analysts said.

Adding to the friction, Iranian parliamentary speaker and top negotiator Mohammad Bagher Ghalibaf reportedly stated that Tehran will keep the key waterway closed to shipping traffic until the US fulfills the conditions of their June interim peace deal.

Meanwhile, Qatar's Foreign Ministry spokesperson, Majed Al-Ansari, reported that mediators are waiting for Iran and Oman to finalize a deal to manage the strait before attempting to resume US-Iran talks.

However, US President Donald Trump stated on Truth Social, "There are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran."

Amid these disruptions, shipping data indicated that Saudi Aramco restarted limited crude loadings from within the strait last week with additional tankers lined up for spot market sales.

Beyond crude, the downstream market faced intense pressure as the US diesel crack spread surged past $100/bbl on Monday, reaching a record $102.20/bbl.

Pete Mento, managing director at Baker Tilly US Global Trade Advisory Services, noted that global diesel supplies are exceptionally tight due to concurrent disruptions in Russian refining, Middle Eastern flows, and lower Chinese output, leaving US distillate inventories at their lowest August level since 1996.

Market strategists pointed out that while oil prices continue to trend toward $100/bbl on geopolitical noise and fading diplomacy, traders remain caught in a recurring cycle of volatile price swings driven by shifting political rhetoric and market sentiment.

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