September WTI crude oil (CLU26) today is down -4.87 (-5.75%), and September RBOB gasoline (RBU26) is down -0.1186 (-3.81%).

Crude oil and gasoline prices are sharply lower today, with gasoline falling to a 3-week low. Easing tensions in the Middle East are weighing on crude prices today after President Trump called off planned strikes on Iran and Iran said progress was being made in negotiations with Oman to get more ships moving through the Strait of Hormuz.

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Crude prices are falling today in hopes that the Strait of Hormuz could soon be reopened as geopolitical tensions ease. President Trump called off a planned attack on Iran, and Iran suggested negotiations to get more ships moving through the Strait of Hormuz were making progress. Saudi Arabia's Crown Prince Mohammed bin Salman held a call with President Trump over the weekend and "stressed the need to prioritize dialogue to reduce escalation and the importance of making every possible effort to achieve calm."

Robust crude supplies in China may reduce Chinese crude purchases in the near term, a bearish factor for oil prices. China's crude inventories remain abundant, with supplies falling by only 54 million bbl since early May to around 1.2 billion bbl, according to data from Kpler.

Crude prices also have support as Ukraine intensifies drone attacks on Russian oil infrastructure. Russian crude production fell to 8.928 million bpd in June, the lowest in 2.5 years, according to monthly OPEC data. According to EA Analytics, Russian crude-processing rates will average 3.51 million bpd in July, the lowest in 24 years, amid damage to Russian energy infrastructure caused by drone and missile attacks from Ukraine. According to Bloomberg, Ukrainian forces have attacked Russian fuel-producing facilities more than 50 times this year, hitting at least 24 of Russia's 34 largest refineries. As of the end of June, around 90% of Russian regions have imposed some form of fuel rationing or reported supply issues, as refining capacity has plunged following damage to facilities. The strikes have deepened a nationwide gasoline shortage, with several major refineries shut down and the government banning almost all gasoline, jet fuel and diesel exports. Russia is the world's number two diesel exporter, after the US, according to Vortexa.

Stronger Russian crude exports are also adding to global oil supplies, which is bearish for prices. Data compiled by Bloomberg show the four-week average of Russian crude exports remains above 4 million bpd in the period to July 26 and rose to 4.13 million bpd through June 28, the highest since Russia invaded Ukraine in 2022. Russia may be boosting its crude exports as the country's refining capacity has plunged due to damage at its refining facilities from Ukraine's drone and missile attacks.

As a bearish factor for crude, OPEC delegates on Sunday approved their final increase of +188,000 bpd in crude production for September. The group has now restored all of the 1.65 million bpd supply cutback it made back in 2023 and said it plans to hold output steady for the rest of the year after the September hike. The production increases by OPEC+ might prove difficult to achieve amid renewed US-Iran military attacks in the region. OPEC's June crude production rose by +2.34 million bpd to 18.75 million bpd.

Vortexa reported today that crude oil stored on tankers that have been stationary for at least 7 days rose +4.6% w/w to 112164 million bbl in the week ended July 31.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of July 24 were -6.4% below the seasonal 5-year average, (2) gasoline inventories were -6.6% below the seasonal 5-year average, and (3) distillate inventories were -8.5% below the 5-year seasonal average. US crude oil production in the week ending July 24 was unchanged w/w at 13.796 million bpd, just below the record high of 13.862 million bpd posted in the week of November 7.

Baker Hughes reported last Friday that the number of active US oil rigs in the week ended July 31 rose by +1 to 451 rigs, just below the 1.25-year high of 452 rigs posted in the week ended July 17.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.