August WTI crude oil (CLQ25) today is down -0.73 (-0.99%), and August RBOB gasoline (RBQ25) is down -0.0129 (-0.56%).
Crude oil and gasoline prices today gave up sharp overnight gains and turned lower on speculation that Iran’s response to the US bombing of its nuclear sites is unlikely to disrupt oil supplies from the Middle East significantly. Crude prices today initially soared to a 5-1/4 month high in the initial reaction to the US strike over the weekend on Iran’s nuclear facilities.
Crude prices have support due to concern that the US strikes over the weekend on Iran’s nuclear facilities could lead to an escalation of the Israel-Iran conflict that could lead to disruption of Middle Eastern oil supplies. Iran vowed retaliation and kept up attacks on Israel today, while Israeli forces kept up strikes on Iranian military sites and airports. Iran’s army command said the US has directly entered into war and should await “severe consequences” and that the Iranian army is “now free to take any action” against US interests. President Trump said he would respond with “far greater” force to any Iranian retaliation on US assets.
So far, Iran has not tried to close the vital Strait of Hormuz, which handles about 20% of the world’s daily crude shipments and also 20% of the world’s LNG shipments. However, Iran’s parliament on Sunday called for the closure of the strait, although that cannot happen without approval from Supreme Leader Khamenei. Energy research firm Kpler Ltd. said, “If Iran blocks the Strait of Hormuz, even for one day, oil can temporarily hit $120 to $150 a barrel, and if it attacks major oil production or export facilities in neighboring countries, it may drive up prices higher for longer.”
Concern about a global oil glut is negative for crude prices. On May 31, OPEC+ agreed to a 411,000 bpd crude production hike for July after raising output by the same amount for June. Saudi Arabia has signaled that additional similar-sized increases in crude output could follow, which is viewed as a strategy to reduce oil prices and punish overproducing OPEC+ members, such as Kazakhstan and Iraq. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production. OPEC+ had previously planned to restore production between January and late 2025, but now that production cut won’t be fully restored until September 2026. OPEC May crude production rose +200,000 bpd to 27.54 million bpd.
