Brent crude was on course to gain about 21% in July, despite falling by more than $1 to around $88 a barrel during early trading. West Texas Intermediate slipped below $83 but remained set for a monthly increase of nearly 20%.
The retreat at the end of the month reflected signs that more crude and liquefied natural gas cargoes were moving through key maritime passages. Traders also took profits after sharp gains driven by military attacks, shifting blockade arrangements and threats against energy infrastructure across the Gulf and Red Sea.
Prices remained elevated because shipping conditions have not returned to normal. Tanker operators face higher insurance premiums, freight charges and security expenses, while military activity has increased the risk of delays or damage to vessels carrying crude, refined fuels and gas.
The Strait of Hormuz remains the central concern for oil markets. Before the conflict, about 20 million barrels of oil and petroleum products passed through the waterway each day, representing roughly one-fifth of global consumption and more than a quarter of seaborne oil trade.
Disruptions since the war began on February 28 have forced producers, refiners and commodity traders to seek alternative routes and supplies. Pipelines linking Gulf production centres to Red Sea and Mediterranean ports have provided limited relief, but their capacity is insufficient to replace normal traffic through Hormuz.
Global oil production was estimated to be about 9.4 million barrels per day below pre-war levels during July. Supply is projected to average 102.6 million barrels per day in 2026, a decline of about 3.7 million barrels per day from last year, provided hostilities ease and damaged infrastructure is restored.
The supply shock has been partly contained by weaker demand, releases from emergency reserves and rising exports from producers outside the Gulf. Higher fuel prices have reduced consumption in parts of Asia, while the United States, Brazil, Canada and Guyana have increased their importance in global trade.
United States crude and petroleum-product net exports reached a record 5.8 million barrels per day in April as buyers sought alternatives to disrupted Middle Eastern supplies. Refiners also increased exports of diesel and jet fuel during the second quarter, when shortages pushed product margins higher.
A steep decline in United States crude stocks added support to prices during the final week of July. Commercial inventories fell by 7.2 million barrels, substantially more than market expectations, indicating tighter availability despite high domestic production.
Oil’s July rally accelerated after Washington announced renewed military operations and restrictions covering Iran’s coastline, ports, terminals and vessels. Brent gained almost 10% in a single session on July 13, settling above $83, before climbing past $100 later in the month as attacks threatened additional routes.
Prices subsequently dropped when the United States and Iran paused strikes for two days, highlighting the market’s sensitivity to diplomatic signals. Brent fell below $92 after touching $102, but renewed attacks and threats prevented a sustained return to levels seen before the July escalation.
The Red Sea has emerged as a second major pressure point. Houthi forces have threatened Saudi shipping and attacked energy-related targets, increasing risks around the Bab el-Mandeb Strait and Gulf of Aden. Saudi Arabia has sought greater maritime cooperation among regional and international partners to protect commercial traffic.
OPEC+ producers are preparing to consider another output increase when a core group meets on August 2. The alliance is expected to approve an increase of about 188,000 barrels per day for September, completing the reversal of 1.65 million barrels per day of voluntary reductions introduced in 2023.
Further increases may be paused from October as the group assesses available spare capacity, production losses and the outlook for demand. About 2 million barrels per day of earlier cuts would remain in place, while negotiations continue over national production quotas for 2027.
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