On Friday, July WTI crude oil closed up 7.26% at $4.94, while July RBOB gasoline rose 3.95% by $0.0847 following a major military strike launched by Israel against Iran. This military action initially propelled crude prices by 11% amid fears that Iran might disrupt oil flows through the Strait of Hormuz, which facilitates 20% of the world’s oil consumption. The situation escalated when Iran retaliated with ballistic missile strikes into Israel, prompting Israel to commit to ongoing military operations.
Despite the surge in prices, concerns about potential oversupply limited further increases, as OPEC+ members possess the capacity to ramp up production if needed. Reports indicated Saudi Arabia’s willingness to boost crude output by 411,000 barrels per day (bpd) in August and possibly September. As of June 6, U.S. crude oil inventories fell 8.3% below the seasonal five-year average, while crude production slightly increased to 13.428 million bpd, remaining below the record high.
The ongoing geopolitical tensions in the Middle East and developments in global oil production could heighten market volatility. On the supply side, OPEC+ is moving to restore production following a two-year cut, with total production expected to increase gradually to 2.2 million bpd.
