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US Oil Update: Futures Retreat as Middle East, Black Sea Supply Risks Recede

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Crude futures plunged in after-hours trading on Monday, pulling back from a multi-session high, as immediate supply threats across key Middle Eastern and Black Sea crude exporting markets began to ease.

Front-month West Texas Intermediate crude futures retreated 8.3% to $81.88 per barrel, while Brent futures plunged by 9% to $87.75/bbl.

EBW Analytics strategists said on Monday that the market could return to an oversupplied balance if hostilities continue to ease, though risks remain elevated given the potential for the conflict to broaden.

The US has held off on new military strikes against Iranian targets since Friday, following 13 straight nights of attacks aimed at degrading Tehran's ability to disrupt commercial shipping in the Strait of Hormuz.

Iran, in response, reportedly signaled that it would stop carrying out attacks on its Gulf neighbors as long as the US also refrains from striking, as Tehran held talks with Oman over the Strait of Hormuz.

On Monday, the US Central Command said that Washington's ongoing blockade against Iran has redirected 17 commercial vessels, disabled two, and boarded two to enforce compliance.

Earlier on Monday, Iran's Foreign Ministry spokesman, Esmail Baghaei, said that while "it's possible that mediators share messages from the US side about current developments," no formal peace negotiations between Iran and the US are currently taking place.

He said talks between Tehran and Muscat have no connection whatsoever with the US and are ongoing.

However, Saudi Arabia's Ministry of Defense on Monday intercepted drones from Iraq and Yemen's Houthis targeting its oil facilities.

Soojin Kim, research analyst at MUFG, said that although the pause in US military action has eased immediate supply fears, constrained maritime traffic across key export routes suggests geopolitical risk remains elevated.

The defense ministry said in a social media post that the Gulf state's air defenses intercepted and destroyed several drones that targeted petroleum facilities in the country's Eastern Province and Riyadh region.

On Monday, the Houthis also said they launched drone attacks on Saudi Arabian oil infrastructure in response to incursions by the Gulf state's drones.

Yahya Saree, the Houthis' spokesperson, said that several targets in the supply and transport of crude oil from eastern Saudi Arabia to Yanbu were struck by several drones.

Saudi Arabia has re-routed its crude output to Yanbu via its east-west pipeline to get around Iranian attacks on shipping in the Hormuz.

Meanwhile, traffic through the Hormuz, through which 20% of the world's oil and liquefied natural gas supplies flowed before the conflict, remains restricted, with the latest shipping data showing only 29 confirmed crossings between July 24 and 26.

Bab el-Mandeb, by comparison, recorded 100 verified crossings, with 51 vessels entering the Red Sea and 49 exiting.

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Crude Benchmarks Post 3rd Straight Weekly Gain Amid Middle East Supply Fears

Global oil benchmarks logged their third straight week of gains as the escalating US-Iran conflict, a closed Strait of Hormuz, and tanker attacks intensified supply concerns, even as prices pulled back slightly on Friday.West Texas Intermediate settled higher at $90.47 per barrel, up from $82.47/bbl the previous week, while Brent closed at $98.70/bbl, up from $88.30/bbl a week earlier.Brent futures registered a weekly increase of 11.8%, while the WTI futures contract rose about 8.3% over the week.The rally kicked off early in the week following intensified US-Iran military exchanges and reports that Iran had received mediator-backed proposals for a ceasefire.However, diplomatic hopes quickly evaporated as shipping traffic through the critical Strait of Hormuz ground to a halt due to active military exchanges, tanker strikes near Oman, and decisions by major refiners like India's state-run firms to cancel crude liftings to avoid the hazardous chokepoint."The key question is at what price level pressure begins to build on the Trump administration to return to the negotiating table," ING noted.Mid-week panic deepened significantly as Brent breached the $100/bbl mark on Thursday, hitting its highest level since May 22, while WTI futures touched their highest since June 11.The upward spiral was supercharged by a combination of factors such as Houthi attacks on Red Sea commercial vessels and Saudi tankers near the Bab el-Mandeb Strait, President Donald Trump's warnings of major military action against Iran, threats from Iranian officials targeting regional exports, and storm-related support from Tropical Storm Bertha.Meanwhile, Murban widened its premium over Brent well beyond its pre-conflict relationship, when Murban typically traded near parity levels or at only a modest premium, Naveen Das, senior analyst at Kpler, toldin an emailed response."As of July 23, 2026, Murban surged 19% to above $106/bbl while Brent climbed to $97-100.69/bbl, putting Murban at a roughly $6-9/bbl premium to Brent, a sharp outlier versus the pre-conflict relationship, where Murban typically traded within a few dollars of Brent or at a modest quality premium," Das said.Compounding global supply pressures, physical disruptions extended outside the Middle East following an attack on the Caspian Pipeline Consortium terminal on Russia's Black Sea coast, threatening the bulk of Kazakhstan's crude exports.Although prices cooled on Friday, analysts noted that underlying physical markets remain exceptionally tight.While the European Union's Oil Coordination Group assured markets that commercial inventories can temporarily cover regional demand, shrinking global stockpiles, low US Strategic Petroleum Reserves, and persistent threats to critical trade corridors leave the energy sector acutely vulnerable to further shocks, analysts warned.The US oil rig count dropped by two from 452 the previous week to 450, in the week ending July 24, according to data from Baker Hughes (BKR) released Friday. That compares with 415 oil rigs in operation a year earlier.The consolidated North American oil and gas rig count, a key early indicator of future production levels, increased by 5 to 791 from 786 the previous week.On the supply side, US commercial crude oil inventories increased by 2 million barrels to 411.7 mmbbls in the week ended July 17, the Energy Information Administration said in its weekly report on Wednesday.The US oil rig count dropped by two from 452 the previous week to 450, in the week ending July 24, according to data from Baker Hughes (BKR) released Friday. That compares with 415 oil rigs in operation a year earlier.The consolidated North American oil and gas rig count, a key early indicator of future production levels, increased by 5 to 791 from 786 the previous week.Money managers in the WTI crude futures and options markets maintained their net long positions in the week ended July 21, according to the Commodity Futures Trading Commission's latest Commitments of Traders report released on Friday.The data showed that money managers reported 189,485 long positions, up 6,602 from July 14, while short positions were up 6,080 to 102,580.Meanwhile, OPEC+ producers are expected to approve another oil output increase for September at their August 2 meeting, Reuters reported on Thursday.

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Oil & Energy

US Oil Update: Futures Settle Lower After US-Iran Talks Report, Red Sea Flows Hold

Crude oil futures fell in after-hours trading on Friday, pulling back from multi-month highs above $100 per barrel, as markets weighed signs that oil was still managing to transit the Red Sea despite the recent escalation in hostilities.Front-month West Texas Intermediate crude futures tumbled almost 1.7% to $90.47 per barrel, while Brent futures slipped by almost 2% to $98.7/bbl.Pakistan is reportedly exploring a resumption of stalled US-Iran negotiations to end their nearly five-month-old conflict, following a diplomatic push by China, Tehran's largest trading partner.Though Iranian officials have maintained public defiance, Iran's Interior Minister Eskandar Momeni traveled to Islamabad this week for exploratory talks, marking his second visit in ten days.Momeni, considered an ally of the Islamic Revolutionary Guard Corps, met with Pakistani leaders and defense chief Asim Munir during the trip.On Friday, President Trump reportedly said he will soon make a decision on whether to launch a "massive attack" on Iran as the Middle East conflict has widened a new battleground in the Red Sea."We're talking to them right now. I think they're getting more and more serious as the days go by...I consider that the smarter way, but the other's probably the easier way, doing what we're doing - and we can take that to a much higher level if we want to," Trump told reporters at the White House.The US Central Command said it had completed a 13th consecutive night of attacks on Iran, targeting Iranian military command centers, drone storage facilities, communication networks, and coastal surveillance sites to further diminish the threat Tehran poses to vessels transiting the Hormuz.US Centcom said that over 50,000 US service members are operating across the Middle East.Iran, in response, said it attacked US military equipment depots at Al-Adiri, known as Camp Buehring, in northern Kuwait, and the positions of US troops at Camp Arifjan and at Camp Doha, near Kuwait City.Tehran's also said they had significantly damaged a surveillance tower used by the US Fifth Fleet in Bahrain. On Friday, the IRGC warned the populations of Gulf countries of potential strikes against US military personnel who may be using "buildings in cities as locations to direct their crimes."Kim said Trump warned of a potentially larger US military response against Iran, while Iran threatened retaliation against regional energy infrastructure if attacks escalate further.On the supply front, the security situation in the Hormuz has deteriorated over the past weeks, with the latest shipping data showing only six confirmed crossings on July 23, down 60% day-over-day.Kpler said that five of the six vessels followed the Iranian Unilateral Scheme, highlighting the continued concentration of traffic along that route. Traffic through the Bab el Mandeb Strait increased, with 49 confirmed crossings recorded on July 23.

Oil & Energy

Murban-Brent Spread Widens as Middle East Disruptions Keep Gulf Crude Supply Tight, Analysts Say

Geopolitical tensions have widened Murban-Brent price spreads, surpassing pre-conflict levels, although they remain below peaks seen at the start of the war, with analysts expecting the spread to narrow only if Middle East hostilities ease.As of about 11.30 a.m. ET on Thursday, Murban crude rose by about 21% to about $108 per barrel, while Brent gained nearly 7% to around $101/bbl.Murban widened its premium over Brent well beyond its pre-conflict relationship, when Murban typically traded near parity levels or at only a modest premium, Naveen Das, senior analyst at Kpler, toldin an emailed response."As of July 23, 2026, Murban surged 19% to above $106/bbl while Brent climbed to $97-100.69/bbl, putting Murban at a roughly $6-9/bbl premium to Brent, a sharp outlier versus the pre-conflict relationship, where Murban typically traded within a few dollars of Brent or at a modest quality premium," Das said.Under a de-escalation scenario, Das said he expects the premium to narrow within one to three weeks if hostilities ease, citing the March 2026 pullback, when Murban dropped 7.28% and Brent fell 9.26% after a single de-escalation signal.However, a prolonged conflict could potentially keep the Murban-Brent spread "structurally wide" or widen it further as Strait of Hormuz transits remain 40% to 50% below pre-conflict levels and more cargoes travel with their automatic identification systems switched off, reducing visible supply.Kpler identified only two meaningful pipeline alternatives if both the Strait of Hormuz and Bab el-Mandeb remain disrupted. Saudi Arabia's East-West Pipeline, also known as Petroline, with capacity of about 5 million b/d, and the UAE's Habshan-Fujairah pipeline, or Adcop, with capacity of roughly 1.5 to 1.8 million b/d."The catch is that Petroline only solves half the problem in this dual-disruption scenario, since Yanbu-loaded cargo bound for Europe still has to run the Bab el-Mandeb/Red Sea gauntlet (or go around the Cape) to get there," Das said, noting that Adcop is considered more "safe."Those routes provide combined bypass capacity of only 6.5 million b/d to 7 million b/d, well below the Gulf's crude and condensate exports of over 17 million b/d to 18 million b/d through Hormuz, while Europe-bound cargoes still face Red Sea risks."We could direct all Red Sea flows via the Mediterranean, but it adds time and costs to transits," the analyst said, adding that he expects "pick up in 'dark transits' which could support the functioning of the two existing bypasses."He added that the likely scenario looks like a return to 2023-2025, when shipping firms routed around the Cape of Good Hope.Kpler expects shipping companies to expand Cape of Good Hope rerouting after crude and product flows around the route climbed to 8.7 million b/d during the first five months of 2024 from an average of 5.9 million b/d in 2023."Given the current disruption spans both chokepoints rather than just one, expect transit-time extensions in that same 10-15+ day range for Gulf-to-Europe cargo, plus new knock-on effects for some Gulf-to-Asia routings that previously threaded both straits," Das said.The longer route could extend Gulf-to-Europe voyages by 10 to 15-plus days or roughly double transit times, while rising war-risk insurance and freight costs continue to lift delivered crude prices, contributing to Brent's roughly 35% to 40% monthly gain, Kpler data showed.Fabian Ng, Argus' head of crude pricing, toldthat Brent traded at a discount to Murban in 2025 as well as in January-February 2026.In 2025, the 4.30 p.m Singapore marker price for front-month ICE Brent futures averaged a $1.53/bbl discount to Murban futures, and a 19 cents/bbl discount in January-February 2026, before the war, Ng said.However, Brent's discount to Murban on Thursday was much wider, although still below earlier peaks. "The discount of $5.82/bbl on 23 July was wider than that of the pre-war average, but below the peak of $10.88/bl discount in March, when Murban prices had spiked directly following the start of the war," Ng said.Ng also expects Murban's premium to narrow if Middle East supply risks ease, under a de-escalation scenario, narrowing Murban's premium over Brent."But under a prolonged disruption scenario, Murban exports from Fujairah will probably retain strong demand, underpinning the grade's value relative to ICE Brent futures," Ng argued.The analyst said Murban exports from Fujairah and Oman crude shipments from Mina al-Fahal remain the Gulf's most insulated export routes.Murban exports from Fujairah reached a record 1.8 million b/d in June, Ng said, citing Kpler data. Oman crude exports averaged over 850,000 b/d in the same month.Sean Lui, Argus' freight specialist, said some Asian buyers are already considering rerouting Saudi crude around the Cape of Good Hope as Red Sea security risks rise, although some Chinese-owned very large crude carriers continue using the route."A switch to the longer route will add roughly 30 days to the journey time, at a minimum," Lui told.This would increase ton-mile demand, tightening tanker supply and lifting freight rates across regional markets.The freight analyst noted that only Saudi-linked vessels currently appear to face direct threats, while ships loading at other Red Sea ports or transiting the area have faced limited disruption despite the deteriorating security environment.Almost no Murban exports transit the Red Sea, Ng said. Most exports depart for Asian markets, and so any halt in flows through the Bab el-Mandeb Strait will only cause "minimal logistical disruptions for Asian buyers."Kpler's Das said Bab el-Mandeb carries only a small share of UAE crude exports, with flows totaling about 17,000 b/d in April, 65,000 b/d in May, 63,000 b/d in June and roughly 39,000 b/d in July.Those shipments represented less than 2%-3% of the UAE's total crude exports of roughly 2.5 million b/d to 3 million b/d, while most Murban cargoes destined for Asia bypass the Red Sea entirely, Das said.Kpler data estimated that combined Middle East crude imports into China, India, South Korea, Japan, Singapore and Thailand fell from about 13.4 million b/d in January to below 7 million b/d in April before partially recovering by July.China's imports alone dropped from more than 5 million b/d in January to roughly 1.4 million b/d to 2.4 million b/d during the worst months, before dark-routing capacity helped restore some lost flows, according to Das.In a normalization scenario, Das said that a verified US-Israel-Iran ceasefire, a Houthi halt to attacks and a recovery in visible Strait of Hormuz traffic would provide the clearest signal for prices to normalize.Murban's premium could narrow within one to three weeks, while Brent and West Texas Intermediate may need four to eight weeks to stabilize, Das added.Argus also expects clear commitments from the US and Iran to end hostilities, restore safe navigation and increase shipping traffic before Brent-Murban spreads and crude prices return to more typical levels.On any signals that Murban-Brent spreads are normalizing, Ng said that, given the uncertainty surrounding broader risks tied to the Middle East, de-escalation would require clear statements from the US and Iran.