Oil settled down more than 2% on Thursday as OPEC and the IEA cut their demand forecasts and US crude inventories posted their largest weekly build since January 2023. Prices had fallen more than 3.5% earlier in the session after reports that Houthi drones struck a Saudi Aramco refinery, while the US and Iran traded competing claims over control of the Strait of Hormuz.
Demand cuts and a hefty crude build
Brent futures finished $1.91, or 2.15%, lower at $87.07 a barrel on Thursday, ending a six-session rally. WTI crude closed down $2.02, or 2.4%, at $81.25 a barrel, snapping a five-session advance.
Investors weighed data from the US Energy Information Administration showing US commercial crude oil inventories rose by 17.4 million barrels to 424.4 million in the week ended August 7, their largest weekly gain since January 2023, as exports slumped. That build pushed stockpiles to their highest level since June 5.
Crude oil markets also absorbed weaker demand signals. OPEC lowered its 2026 world oil demand growth forecast to 580,000 barrels per day in its monthly report. The IEA now expects a contraction of 1.6 million bpd in consumption this year, up from a drop of 1 million bpd forecast last month, citing higher prices and supply curbed by the US-Israeli war with Iran.
Houthi drone strike jolts prices
Prices briefly extended losses after Yemen's Houthi-run Saba news agency reported the group attacked an Aramco refinery in Jazan with two drones on Thursday. The news sent diesel cracks to an all-time high, and the Jazan refinery can produce 250,000 bpd of ultra-low sulfur diesel, according to Saudi Aramco's website.
A Houthi military source said the strike answered what the group called Saudi violations of Yemeni airspace and sovereignty in Saada and Hajjah provinces. Saudi Arabia did not immediately comment.
Hormuz dispute keeps supply risk alive
Supply disruptions in the Middle East and the Black Sea region continued to support prices, as the US and Iran made competing claims over the Strait of Hormuz, through which about 20% of global oil supply passed before the Iran war began. Iran's newly appointed Basij paramilitary chief said the strait remained under Iran's control and management, a day after President Trump said the US had total control of the waterway.
Talks to revive the interim deal agreed in June have made no progress, a senior Iranian source said, and US Defense Secretary Pete Hegseth said Washington could keep a blockade on Iranian ports for as long as needed. US Energy Secretary Chris Wright said about 9 million bpd was moving through the strait weekly. Shipping data showed vessel crossings, excluding container ships, fell to five on Wednesday, their lowest in three weeks. Before the war, 125 to 140 vessels passed through the waterway each day.
According to Reuters: "Conflicting stories continue to drive the narrative" over who controls the strait, said Tim Snyder, chief economist at Matador Economics.
Adding to the tightness, Russia's seaborne oil product exports fell sharply in July after Ukrainian drone attacks forced unplanned maintenance at key domestic refineries. In Orsk, a refinery hit by a Ukrainian drone strike two days earlier has shut down, and repairs could take up to six months, the regional governor said.
Source: Commodities & Futures News
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