Oil posted its biggest monthly gain since March as traders grappled with simmering global conflicts and threats to supply from the Persian Gulf to the Black Sea. Brent's most active contract settled up 1.2% near $88 a barrel while West Texas Intermediate rose 1% to settle below $85, according to Bloomberg. All energy markets surged higher in July, with Brent, the global benchmark, posting a nearly 24% gain. Products such as diesel and natural gas also logged big increases, with US major Chevron Corp. saying it expects fuel-making margins to remain elevated as the global refining system struggles to keep pace with the scale of supply disruptions. The dramatic monthly performance reflects the market's response to multiple supply disruption threats across key oil-producing regions.
US President Donald Trump said he's losing confidence in Iranian negotiators in the latest sign that armed hostilities could drag on, further disrupting energy shipments from the Middle East. The latest gains came after Iran launched a barrage of missiles at American forces in the Middle East early Wednesday as the US partnered with Saudi Arabia to strike Tehran-backed militias in neighboring Iraq, killing at least 20 fighters and six Iranian advisers. As per Business Standard, the flare-up on multiple fronts, after several days of relative calm, raised the risk of a return to all-out war and underscored the difficulty of winding down a five-month conflict. Trump told a Fox News reporter using a series of vulgarities that the US will hit back hard in response to the Iranian attacks. Both sides seem to have unlimited missiles, with some pundits thinking it may take boots on the ground to end the conflict, which would be negative for the markets, at least in the short term. The price surge was primarily driven by declining U.S. crude inventories, which fell by approximately 3.3 million barrels in the week ended July 24 as reported by the American Petroleum Institute.
Hedge funds boosted bullish wagers on US oil at the fastest pace since March as supply disruptions from Iran to the Red and Black Seas are set to once again boost demand for American crude. Money managers increased their net-long positions on West Texas Intermediate crude by 21,402 lots to 108,307 in the week ended July 28, the biggest jump in about four months, according to weekly CFTC data on futures and options. Speculators now hold the most bullish stance on US oil since mid-June, with the hike in bullish bets driven not only by the Iran war but also by renewed attacks from Iran-backed Houthi militants on Saudi crude shipments through the Red Sea. The route has become an increasingly important alternative for the kingdom's exports as disruptions in the Strait of Hormuz persist. Fresh attacks on tankers loading crude at the Caspian Pipeline Consortium terminal on Russia's Black Sea coast, which exports most of Kazakhstan's oil, have compounded supply worries. Those risks are likely to intensify the draw on US barrels from overseas, with US crude exports remaining elevated by historical standards as foreign buyers seek to replace disrupted global supplies.
A series of attacks on ships loading oil at or nearby the Caspian Pipeline Consortium terminal in Russia's Black Sea has also put upward pressure on prices. Nine vessels have now been attacked at or bound for the Caspian Pipeline Consortium facility this month alone, the most since Russia's invasion of Ukraine in 2022. The International Monetary Fund still sees a risk the Middle East oil shock could tip the global economy into recession, although the impact would be modest if Hormuz reopens soon, according to Managing Director Kristalina Georgieva. European refiners rely heavily on those barrels, with the CPC continuing oil operations after discussions on Friday about whether to indefinitely halt shipments. Nobody has claimed responsibility for the spate of attacks, although Ukraine has attacked tankers in Russia's Black Sea waters in the past, as reported by Bloomberg.
Adding to market support, OPEC+ is expected to halt oil output increases for three months starting in October, according to sources reported by Reuters. This decision comes after the producer group completes the scheduled return of barrels following voluntary cuts. The production freeze is designed to support oil prices and maintain market stability as global supply dynamics continue to evolve. US oil stockpiles have also continued to draw down, with traders now awaiting official inventory data for confirmation. US major Chevron Corp. said it expects fuel-making margins to remain elevated as the global refining system struggles to keep pace with the scale of supply disruptions. On Thursday, rival Shell Plc reported its second-highest quarterly profit on record, as the conflict in the Middle East fueled a boom in trading as well as refining, according to Bloomberg.
Scott Shelton, energy specialist at TP IC Group Plc, said 'The world is getting tighter and using the US surplus of crude and products to balance, to the extent that the US is getting physically shorter barrels at a much stronger clip than a few weeks ago.' The bottom line is US balances on everything look more bullish, according to Bloomberg. On the corporate front, ExxonMobil Holdings Corp. and Chevron reported blowout profits that they plowed back into debt reduction rather than huge buyback increases, a sign of Big Oil's caution about how long war-driven price rallies will last. Corporate earnings from the energy sector have been particularly strong, with companies benefiting from elevated margins and robust refining operations. Fuel markets also continued to flash signs of tightness, spurring bullish wagers, with net-long positions on US gasoline rising to the highest in more than four months, while long-only bets on US diesel were at the highest in nearly five months. Energy markets have roared higher in July, with double-digit percentage gains for oil as well as products such as diesel, as a fragile pause in hostilities between Washington and Tehran collapsed and the Yemen-based Houthis entered the fray.
