Crude oil futures traded lower on Thursday morning after reports that Iran and Oman would enter into an agreement for the partial reopening of the Strait of Hormuz, according to The Hindu BusinessLine. At 9.34 am on Thursday, October Brent oil futures were at $79.21, down 0.30 per cent, and September crude oil futures on WTI (West Texas Intermediate) were at $74.93, down 0.39 per cent.
Geopolitical driver: Iran-Oman Hormuz deal
The decline followed reports that Iran and Oman would enter into an agreement on new shipping arrangements for the Strait of Hormuz, with a joint statement on the deal now being prepared, The Hindu BusinessLine reported. In their Commodities Feed for Thursday, Warren Patterson, Head of Commodities Strategy at ING Think, and Ewa Manthey, Commodities Strategist, said ICE Brent continues to trade below $80 a barrel as the market pins its hopes on a deal between the US and Iran that would resume energy flows through the Strait of Hormuz.
Iran signalled progress toward this goal, announcing that it has reached an agreement with Oman on new shipping arrangements for the strait, with a joint statement on the deal now being prepared. Iran has insisted that the agreement must proceed without interference from unnamed third parties — a formulation that, in practice, almost certainly refers to the US. The real hinge point now becomes the trajectory of US-Iran discussions, because meaningful progress there is essential before disrupted energy flows can realistically resume.
The Hindu BusinessLine quoted the passage from the ING Think Commodities Feed for Thursday.
Indian MCX crude contracts move against the trend
While Brent and WTI eased, crude oil futures on India's Multi Commodity Exchange (MCX) traded higher during the initial hour of trading on Thursday, The Hindu BusinessLine reported. August crude oil futures were at ₹7,146 against the previous close of ₹7,109, up 0.52 per cent; September futures were at ₹7,073 against the previous close of ₹7,032, up 0.58 per cent.
EIA report: crude builds, product stocks draw
The weekly petroleum status report from the US Energy Information Administration (EIA) for the week ending July 31, covered by The Hindu BusinessLine, showed US commercial crude oil inventories increased by 2.5 million barrels from the previous week.
| Product | Weekly change | Level vs five-year average |
|---|---|---|
| US commercial crude oil | +2.5 million barrels | 407 million barrels, about 6 per cent below |
| Motor gasoline | -1.6 million barrels | 7 per cent below |
| Distillate fuel | -3.5 million barrels | about 12 per cent below |
At 407 million barrels, US crude oil inventories were about 6 per cent below the five-year average for this time of year, according to the EIA report. Total motor gasoline inventories decreased by 1.6 million barrels last week and were 7 per cent below the five-year average, while distillate fuel inventories decreased by 3.5 million barrels and were about 12 per cent below the five-year average.
US product supplied trends
The EIA data also covered US consumption over the four weeks ending July 31, as measured by product supplied, The Hindu BusinessLine reported:
- Total products supplied averaged 20.4 million barrels per day, down 0.9 per cent from the same period last year.
- Motor gasoline product supplied averaged 9 million barrels per day, up 0.6 per cent from the same period last year.
- Distillate fuel product supplied averaged 3.6 million barrels per day, up 1.8 per cent from the same period last year.
- Jet fuel product supplied was up 3.6 per cent compared with the same four-week period last year.
Trading focus
The next catalyst for crude prices, according to Patterson and Manthey as reported by The Hindu BusinessLine, is the trajectory of US-Iran discussions. With ICE Brent trading below $80 a barrel, the market remains pinned to hopes that a US-Iran deal will restore energy flows through the Strait of Hormuz. Meanwhile, the EIA's weekly report for the week ending July 31 put US commercial crude inventories at 407 million barrels, a 2.5-million-barrel week-on-week build that still left stocks about 6 per cent below the five-year average for the season.
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