U.S. crude stocks unexpectedly rise by 2.5 million barrels
Oil futures rose early in the trading session as markets awaited clarity on the strait’s status, with WTI up 0.1% at $75.84 a barrel and Brent up 0.9% at $80.06, the Wall Street Journal reported. By midday, U.S. commercial crude inventories had risen by 2.5 million barrels the prior week, against market expectations for a moderate withdrawal, following a 7.2 million barrel drawdown the week before.
David Russell of TradeStation said in a note that the inventory build was “a welcome sign for investors worried about an energy crunch,” adding that “the nerve-racking drawdowns are abating for now.” Russell also said “oil markets may have a window to stabilize if the Hormuz traffic resumes soon.”
The sell-off accelerated after Bessent said the U.S. could be close to an agreement with Iran to reopen the Strait of Hormuz, with Qatar also reporting progress in diplomatic efforts, according to the Journal. WTI settled down 5.7% at $75.77 a barrel and Brent fell 5.3% to $79.36 — both their lowest closes since July 10.
Robert Yawger of Mizuho said in a note that “today’s negotiations are dealing solely with opening the Strait of Hormuz and getting barrels of oil moving from the Persian Gulf as fast as possible.” Yawger added, “I still expect a bad deal to ultimately get done, which will allow the U.S. to declare some kind of victory, but leave a lot of loose ends, including the nuclear deal.”
David Oxley of Capital Economics said in a note that if a deal is reached, there would likely be a temporary spike in ships departing, but “the fact that there is less oil trapped in the Gulf than in June suggests that the exodus will be smaller, and so prices won’t fall as far as they did following the first MoU agreement.” Oxley added that “getting tankers back in to the Gulf to collect oil and LNG will be key to bringing shut-in oil production in the region back online.”
Shares of Seatrium, a Singapore offshore and marine company, fell 1.4% to S$2.18 despite what Morningstar analyst Chokwai Lee called a pipeline exceeding S$32 billion over the next 24 months. Lee said in a note that new order wins year to date totaled just over S$100 million, but he thinks the company’s S$4.4 billion to S$8.5 billion annual order win projection through 2030 is achievable given strong demand from energy security and the green transition. Morningstar raised its fair-value estimate for the company by 4% to S$2.90.