Oil settles flat as traders weigh EIA data against Hormuz tensions

Bank of America analyst: diesel market ‘tight, volatile, expensive’ into 2027

Oil futures swung between sharp morning declines and modest gains Wednesday before settling little changed. WTI ended up 0.1% at $83.27 a barrel while Brent added 0.1% to $88.98, according to Dow Jones Market Talks. Earlier in the session WTI had fallen 2.6% to $81.12 and Brent 2.3% to $86.97 in delayed reaction to the U.S. Energy Information Administration’s 17.4 million barrel crude inventory report, before recovering as focus returned to geopolitical risk in the key Middle East shipping lane.

The 17.4 million barrel build in U.S. commercial crude inventories reported by the EIA — attributed to rising imports and falling exports — surprised analysts who had expected tighter supply. Antonio Di Giacomo, senior market analyst at XS.com, said the latest data have raised doubts about the strength of U.S. demand, and warned that “a sustained increase in commercial inventories could limit some of the momentum from geopolitical risks, particularly if it coincides with signs of slowing fuel consumption in the coming weeks.” Analysts at Ritterbusch & Associates said the stock build was likely a one-off to be followed by draws in coming weeks, but the big reduction in the deficit “cannot be dismissed.” They characterized the morning retreat as likely a technical correction and partly a delayed reaction to the inventory data.

Both the U.S. and Iran claimed control of the Strait of Hormuz on Wednesday, though shipping through the waterway remained limited by the risk of Iranian attack. President Trump posted on Truth Social that the U.S. is “in complete control” of the strait, despite few ships moving through it. Aarathi Krishnan, chief executive of geopolitical risk firm Raksha Intelligence Futures, said “I think the U.S. has significantly underestimated Iran’s resolve.” Even if a deal is struck to reopen the strait, Krishnan said, normal traffic would not resume immediately because insurers wait two to three months of stable patterns before lowering war-risk premiums. “For insurers to bring down premiums they don’t wait for the deal to be announced, they look for patterns over two to three months,” she said. “They observe it and then they bring down risk premiums, which then makes it affordable for ships to start moving again.”

In a separate note, Bank of America Global Research commodity strategist Francisco Blanch warned that curbs on diesel demand in some regions due to high prices would probably not be enough to rebalance the market as it enters the strongest seasonal demand period. “Harvest-related demand growth, low inventories, and ongoing supply outages may outweigh early signs of demand destruction,” Blanch said. “Absent a meaningful supply recovery, the diesel market appears poised to stay tight, volatile, and expensive well into next year,” he wrote.

Bank of America Securities said China’s crude oil imports are likely to recover gradually after falling 13% in the January-to-July period. “Refined-product export curbs are already easing, with our channel checks suggesting that export allowances had returned meaningfully by August, supporting higher refinery runs and crude imports,” the bank said. Elevated inventories should also limit stockbuilding while crude prices remain high, BofA said, projecting the full-year import-volume decline would narrow to 8%, reflecting what it called a “meaningful but incomplete recovery.”

In company-specific news, J.P. Morgan analysts said Orsted investors will focus on the Danish renewable-energy group’s plans for shareholder returns after the company posted second-quarter results with no surprises. Orsted provided information on its plan to reinstate dividends for 2026 and to consider capital rebalancing measures after 2027 depending on the balance sheet, which JPM analysts said they expect to be a share buyback, though a special dividend is also possible. Investor focus will also be on upcoming offshore wind tenders, after Orsted failed to win any contracts during a recent Danish tender, the analysts said. Orsted shares fell 3% to 143.85 kroner.

Analysts at J.P. Morgan separately said RWE’s guidance would be viewed as conservative given several factors that could provide upside. The German energy company’s near-term guidance is based on end-of-June commodity prices, which have since moved higher, JPM said. RWE flagged capacity auctions for more than 10 gigawatts in Germany and the Netherlands that have not been baked into its 2031 guidance and said it was nearing a deal for two data centers. RWE shares rose 0.7% to 58 euros. Jefferies analysts separately wrote that RWE’s second-quarter earnings were in line with July’s preliminary figures and that the company’s long-term growth outlook is strong, with significant opportunities across renewables, flexible generation, storage, and grids.

Korea Electric Power could post weaker third-quarter earnings due to higher fuel-purchase costs, Kiwoom Securities analyst Cho Jae-won said. The South Korean state utility is forecast to spend 6.354 trillion won on oil, coal and gas to fuel its power plants in the July-September period, up 29% on quarter and 16% on year. The system marginal price at which KEPCO purchases power from private electricity companies rose to 133 won per kilowatt-hour in July and 150 won per KWh in August, from 118 won per KWh in the second quarter.

In Australia, Origin Energy shares rose 6% to a three-month high of 11.93 Australian dollars on its Energy Markets business’s underlying Ebitda of 1.701 billion Australian dollars in fiscal 2026, beating Jefferies’ forecast by 1.3% and consensus by 1.5%. Origin’s guidance for fiscal 2027 Energy Markets underlying Ebitda of 1.55 billion to 1.85 billion Australian dollars was also ahead of consensus forecasts of 1.61 billion. Jefferies had a buy call and a A$12.22 price target on Origin ahead of its fiscal 2026 result, while analyst Amit Kanwatia noted that “the key offset remains slower wholesale markets and the extent to which lower forward prices pressure FY28 Energy Markets.”

Macquarie raised expectations for Ampol’s upcoming dividend, now expecting the Australian refiner and fuel marketer to declare an interim dividend of 1.75 Australian dollars a share. The estimate “reflects a bottom-end payout of 50% (minimum allowable under Ampol’s policy to which it has tended to strictly adhere),” Macquarie said, adding that the A$340 million EG cash settlement — effectively the “buyback” component of Ampol’s recently completed A$1.165 billion acquisition of the EG Australia business — is “over and above” the dividend. The bank estimated the overall shareholder yield in the first half would be about 3.18 Australian dollars a share, or 8%, while keeping gearing within Ampol’s targeted 2.0-2.5X range.