In this issue of Weekly Market Report, we discuss why oil and bunker prices are not higher considering the heightened geopolitical risks in the Middle East. However, we argue that the risks are increasingly tilted to the upside.
ARA
Low demand, suppliers are fighting for volume.
Fujairah
Port of Fujairah July sales were 215kt in total and doubled vs June but still down 64% compared to July 2025.
Bunker demand remains low due to the ongoing conflict impacting vessel traffic across shipping segments.
Product availability week starting 17th Aug is good across all grades with prompt avails.
Port Louis
A quiet week in the market, avails tightening and suppliers seeing far less traction last week.
Durban
Another quiet market, with noted stems minimal top ups in the port. HSFO remains tight with high premiums with only one supplier having avails. VLSFO remains OK avails wise.
Walvis Bay
A busier market than in the last few weeks, as VLSFO prices remain aggressive as suppliers push for volume. Weather remains poor with all suppliers at anchorage.
New York
Demand has been extremely muted on USEC. Awaiting Q4 tenders to be sent out. Distillate premiums keep rising on demand, scarcity, and agro season approaching.
Malta
Still some issues on barge loadings, but not as bad as last weeks.
Houston
Demand is steady. Fuel oil premiums are steady.
Some refinery maintenance is scheduled for Q4 2026 which could cause intermittent disruptions to fuel oil supply chain. Major delays are not expected.
High premium volatility is expected through the end of the year.
For port availability and demand, download the full report here.
Oil prices continue to trade around SD 90 despite growing expectations that the Strait of Hormuz will remain closed for an extended period of time, as there are no negotiations between the US and Iran. We still argue that with each passing day and continued inventory draws in both OECD countries and China, upside risk to oil prices increases. However, it seems the market, since our last issue, has been focusing on “bearish” news, and we highlight the following factors:
During the last week, the Trump administration has continued to emphasise that the US Navy is escorting an increasing number of tankers through the Strait of Hormuz (SoH). Energy Secretary Wright reiterated yesterday that up to 9 million barrels of oil per day (9 mb/d) are passing through the Strait.
That is approximately twice as much oil as most independent analysts estimate passes through the Strait. Trump went even further last week when he said: “We have total control over the SoH”. On Friday night, he even said the US would declare the SoH a US territory.
It is our clear assessment that Energy Secretary Wright is overstating the traffic in the Strait and the amount of oil going through. However, the market is beginning to price in that more oil is reaching the market. The usual traffic estimates are now virtually useless, as many vessels switch off their AIS transponders.
Attacks on vessels in the Strait are nevertheless continuing. On Thursday, the UAE said that two vessels belonging to the country’s national oil company had been attacked, which was followed by a new confirmed attack on Saturday. If anything, the recent attacks raise the risk that traffic could halt completely.
On Thursday, Treasury Secretary Scott Bessent announced that the US will impose new, stringent economic sanctions on Iran next week. These will be added to the blockade of Iranian ports.
It is becoming increasingly difficult to identify sanctions that could still have an effect and have not already been introduced. However, the statements indicate that the US has put further military strikes on hold ahead of the midterm elections. The risk of the entire region being set ablaze is therefore lower, reducing the geopolitical premium. It is also more difficult for Iran to respond militarily to sanctions than to military strikes. This tends to lower the geopolitical premium in the market.
That said, reports earlier this week suggested that Iran now intends to pursue a more offensive military strategy and is prepared to take the conflict into “enemy territory”. It remains unclear whether this could involve Iran sending troops towards countries in the region that host US military bases.
The change in the US strategy may also indicate that a deal is no longer “imminent”. Trump has said voters will have to live with current high gasoline prices, which he says is a small price to pay to ensure Iran does not acquire nuclear weapons. Hence, the Strait may stay closed for an extended period of time.
The IEA published its monthly report last week. It now expects global oil demand to decline by 1.6 million barrels per day in 2026. That is half a million barrels per day more than it expected last month.
OPEC also revised its estimate lower. However, it still expects an optimistic demand increase of 0.6 mb/d in 2026. The EIA expects demand to decline by 1.3 mb/d.
However, if oil prices remain at their current level, the decline in demand has probably peaked. Hence, we might start to see upward demand revisions in the coming month. All three agencies also forecast a recovery in demand in H2 2026 and in 2027.
But importantly, there are also widespread expectations that supply will soon recover. If the US moves from military to economic pressure, any reopening may be delayed.
The weekly US inventory data showed a surprisingly large increase of 17 million barrels last week. Higher imports from Canada and Venezuela, combined with the lowest export level in 2026, were behind the increase.
However, lower US exports mean less oil is available to markets outside the US. America’s ability to replace Middle East supplies is under pressure. The charts below show US total crude oil inventories and US crude oil exports.
The major news in financial markets last week was that both US consumer and producer prices were slightly lower than expected. This has reduced concerns about rising inflation.
Investors and speculators therefore sold assets such as oil and other commodities, which are typically bought when inflation concerns rise.
However, inflation perceptions can change quickly. With the market in backwardation and oil prices lower, speculators could quickly return to the oil market. The recent move higher in long-end US treasury yields may indicate that inflations fears have already returned.
Negative, or “bearish,” sentiment currently caps the upside for oil and bunker prices. However, this does not change the fact that global inventories continue to decline every day. As we have previously described it, we continue to borrow “oil from the future”.
We therefore see value for buyers in using the latest price drop, or any further declines, to hedge price risk, particularly for the next six months.
It is also important to remember that crude oil is one thing. The market for refined products like MGO remains extremely tight. Even US Energy Secretary Wright acknowledges this.
