Oil, fundamental analysis

Crude prices fell this week as various sources report increased oil flows out of the Persian Gulf as producing countries use varying methods to bypass the Strait of Hormuz and use “ship-to-ship” transfers. Earlier in the week there were, once again, signs of optimism regarding peace talks between the US and Iran but those appear to have stalled by week’s end. A very small inventory build did not dampen the bearish sentiment while new US economic sanctions on Iran and its counterparties had no apparent impact on prices.

WTI’s High was Monday’s $84.70/bbl for October while the Low was Wednesday’s $78.55 (inventory gain). October Brent crude also hit its High on Monday at $93.80/bbl with the low on Wednesday at $85.40. Both grades settled lower on the week. The WTI/Brent spread has now tightened to $5.95.

Some observers of oil flows out of the Middle East believe that as much as 7-8 million b/d may be flowing out of the Persian Gulf, roughly 50% of pre-war levels. Forced to deal with the open again/closed again status of the Strait of Hormuz, Persian Gulf petrostates are using any possible means to export their oil and refined products. Shortly after the Strait was closed by Iran, Saudi Arabia switched to using its East-West pipeline to deliver crude to its Red Sea port where vessels can pass through the Bab el-Mandeb Strait and out through the Gulf of Aden.

Now, the Saudis are also loading cargoes in the Persian Gulf using their own smaller tankers and moving those via the route through the Strait that is closer to Oman while turning off vessel transponders. Once into the Gulf of Oman, ship-to-ship transfers take place to larger merchant vessels which then deliver the crude to its designated markets. Qatar and the UAE are said to be working jointly on a similar operation. Meanwhile, Iraq has been moving some volumes north into Turkey via pipeline then, across to the Mediterranean Sea. While these are mostly short-term fixes, the same countries are developing longer-term projects.

US/Iran settlement talks hit another impasse as the White House told mediators it won’t return to the temporary peace terms put in place in June. And Oman and Iran still have not come to a definitive arrangement for the joint management of the Strait of Hormuz, leaving its future uncertain again.

Venezuela’s oil industry prospects continue to improve as Chevron is reportedly close to a deal to increase its already existing operations by potentially adding 2 new heavy oil fields to its holdings. Additionally, oilfield services company Halliburton is working to bring more of equipment to producers there. On the flip side, Canadian bitumen production may drop by 300,000 b/d next month due to maintenance in the oil sands. However, the US should see lower gasoline and aviation fuel demand as the peak summer driving/traveling season comes to an end.

The Energy Information Administration’s (EIA) Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week increased only slightly while the SPR was down 3.7 million bbl to 290 million bbl (the lowest level since 1982). Production last week held at 13.8 million b/d vs 13.4 million b/d last year.

Oil, technical analysis

October WTI NYMEX futures are trading above the 20-day Moving Average (MA) but below both the 8- and 13-day MAs. Friday’s tight price range indicates trader uncertainty heading into the weekend. Volume is below the recent average at 117,000. The Relative Strength Indicator (RSI), a momentum indicator is neutral at 55. Resistance is now pegged at $84.40 (8-day MA) while near-term Support is $81.50 (20-day MA).

Looking ahead

While there may be disagreements on exactly how much oil is making it through the Strait of Hormuz, shipments are passing, which is bearish for oil prices especially, as the summer travel season winds down. It is highly likely that Oman and Iran will arrive at a plan to 'administer' the Strait and charge some levels of fees making transversing more expensive than before the war. That also will provide greater incentives for bypass initiatives. Expect refined products demand to be strong for at least several weeks as global markets play catch-up on reserves. In the US, the government will have to determine when it will look to restore volumes of crude taken from the SPR.

Natural gas, fundamental analysis

October NYMEX Henry Hub Natural Gas futures saw gains this week as the September contract rolled-off Thursday. Continuing hot weather and a smaller-than-forecasted storage injection provided most of the support. The week’s High was Thursday’s $2.99/MMbtu while the Low was Monday’s $2.76. The Henry Hub contract still remains in a 7-week downtrend overall. Natural gas demand this week has been estimated at about 118 bcfd with power consumption increasing 1.0 bcfd while supply was thought to be 120 bcfd. LNG exports were 18.2 bcf while exports to Mexico were lower at 7.6 bcfd.

A heat wave continues across the EU and UK with wildfires in several areas.  In the UK, natural gas prices at the NBP were most recently higher at $22.10/MMbtu. Dutch TTF futures were also higher at $22.60/MMbtu. Asia’s JKM was quoted at $23.40/MMbtu as Asian and European markets are essentially competing for the same shipments. The EIA’s Weekly Natural Gas Storage Report indicated an injection of 15 bcf vs. a forecast of +21 bcf and a 5-year average of +33 bcf. Total gas in storage is now 3.184 tcf, 0.9% below last year and 5.5% above the 5-year average.

Natural gas, technical analysis

September 2026 NYMEX Henry Hub Natural Gas futures are trading around the 8-, 13, and 20-day Moving Averages. Volume is about the recent average at 100k. The RSI is neutral at 47. Critical Support is $2.75 (20-day MA) with Resistance at $2.85 (Upper-Bollinger Band).

Looking ahead

The 8–14-day forecast looks favorable for natural gas-fired generation for most of the US as record high temperatures spread more northerly. Wildfires and drought have hit several states now. While global LNG prices are strong, the US is currently exporting at maximum output. Look for domestic supply surpluses to continue which will increase storage injections as fall approaches and temperatures start to lower. Based upon current storage levels, the natural gas market looks to be in good shape for the upcoming winter.