West Texas Intermediate for September delivery rose $2.01, or 2.38%, to $86.40 on Friday, while Brent crude for the same contract gained 1.52% to $93.01. Both benchmarks have advanced for five consecutive sessions, with Brent up more than 4% this week. The Brent-WTI spread widened to $6.61 at settlement and briefly exceeded $7.90 intraday, reflecting market concerns over waterborne supply constraints rather than domestic shortages.
The price action follows escalating geopolitical tensions in the Middle East. The U.S. administration described new sanctions as "economic warfare," targeting financial mechanisms used by Iran to monetize crude exports. The United Arab Emirates halted all trade and financial transactions with Iran after accusing Tehran of ballistic missile attacks. Eight vessel incidents in the Strait of Hormuz have been reported this month, including three China-linked supertankers that aborted transits and a vessel struck by a projectile near the waterway.
U.S. commercial crude inventories rose by 4.4 million barrels last week, following a 17.4 million barrel build the prior week, according to government data. Total commercial stocks reached 424.4 million barrels, just 2% below the five-year average for this period. The inventory increases contrast with tightening fuel markets, where distillate stocks fell by 1.5 million barrels to their lowest level in over a month. Refinery processing rates climbed to their highest since September 2019, underscoring a shift in market tightness from crude availability to logistics and product specifications.
The divergence between rising crude stocks and falling distillate inventories highlights a structural imbalance. The U.S. Strategic Petroleum Reserve has fallen below 300 million barrels, the lowest since January 1983, while the International Energy Agency approved a 400 million barrel emergency release earlier in the conflict. Gulf producers have continued moving crude through alternative routes, but traffic through the Strait of Hormuz remains well below pre-war levels of 130 to 140 daily transits, which previously handled roughly 20% of global oil supply.
Persian Gulf refining capacity has declined by 20% from 9.6 million barrels per day recorded before the conflict, a constraint that cannot be resolved by diplomatic headlines. The U.S. Energy Information Administration’s August Short-Term Energy Outlook, published August 6, had forecast U.S. commercial crude inventories to remain below the five-year 2021–2025 low through 2026. The 21.8 million barrel build over two weeks invalidated that assumption, with stocks now just 2% below the five-year average.
The EIA raised its Brent third-quarter price forecast to approximately $85 per barrel, $11 higher than its prior estimate, assuming persistent Hormuz constraints and reduced shipments deplete global inventories. The agency also increased estimates of Middle East shut-in production, expecting most regional output to return near pre-conflict averages by early 2027.
