Oil markets held steady at the start of the week, with crude prices inching higher despite expectations that OPEC+ will implement a significant production boost for September. Brent crude rose to $69.94 per barrel while West Texas Intermediate (WTI) climbed to $68.15, reflecting modest gains of around half a percent.
The resilience in prices comes as geopolitical tensions and refined product disruptions overshadow supply-side expectations. In the Red Sea, Houthi rebels struck a second Greek-operated vessel in 24 hours, escalating risks in one of the world’s busiest oil shipping corridors. The Eternity C, targeted off Yemen’s coast, suffered severe damage, leaving two seafarers injured and two more missing. The vessel was reportedly carrying steel to Iran and was flagged in Liberia.
These attacks come on the heels of another strike on the Magic Seas, which Houthi militants claim to have sunk. Although neither vessel carried Israeli-linked cargo, the escalation has renewed fears of broader disruptions to Suez Canal-bound maritime trade, adding upward pressure on oil prices and insurance premiums.
US Rig Count Drops as Industry Cools Off
Meanwhile, drilling activity in the United States softened slightly. The national rig count fell by eight last week, down to 539—46 fewer rigs than the same period last year. The Permian Basin, which remains the largest contributor, shed five rigs, while other basins like Marcellus and Cana Woodford also saw small declines. Gas-focused rigs fell by one, with oil-directed rigs down by seven.
This trend reinforces the ongoing caution among US producers, who are prioritizing capital discipline over aggressive output expansion despite relatively stable crude prices.
Diesel Strength Defies Expectations
Refined product markets also saw surprising movement. Diesel, which had been forecasted to underperform in 2025, is showing unexpected strength. The East-West diesel price spread rose above $73 per metric tonne this week—its highest since December 2023. This comes as Europe grapples with refinery outages, including disruptions at BP’s massive Rotterdam facility and the bankruptcy of the UK’s Lindsey refinery.
As a result, diesel cracks—refiner profit margins—have widened significantly, hitting $23 per barrel on the ICE gasoil contract. Asian middle distillate supplies are increasingly flowing westward to fill the gap, driven by the financial lure of arbitrage opportunities. This east-to-west movement is helping stabilize global diesel availability despite supply hiccups in Europe.
Global Developments Shape Market Sentiment
Broader geopolitical and corporate developments also weighed on sentiment. Israel is reportedly preparing to pressure Donald Trump on preemptive military action against Iran should he win re-election, amid Tehran’s resumed nuclear enrichment activities. Meanwhile, Shell downgraded its second-quarter performance expectations, Algeria inked a $1.35 billion exploration deal with Eni, and CNPC opened a new office in Madagascar, hinting at interest in the country’s upcoming licensing round.
Back in Europe, the EU approved more flexible gas storage targets, allowing member states to reach the 90% storage mark anytime between October and December. This could offer breathing room as the bloc prepares for another uncertain winter.
In the UK, Glencore stepped in to keep the shuttered Lindsey refinery running temporarily under a new supply deal. At the same time, the company divested its Pasar copper smelter in the Philippines, signaling further portfolio realignments.
Outlook: Oil Rangebound as Markets Balance Risk and Supply
With the US pushing back its trade negotiation deadline to August and OPEC+ expected to finalize its 2.2 million barrels per day production hike by September, oil markets could remain rangebound for the near term. However, Red Sea volatility, European diesel tightness, and downstream refinery issues continue to inject risk premiums into global pricing.
All eyes remain on whether fresh geopolitical flare-ups or production shocks will tip the balance. For now, the market appears to be pricing in a delicate equilibrium—tempered supply optimism on one hand, and mounting global risk on the other.