Recap: The crude market on Friday ended the session higher on some short covering ahead of the long Fourth of July holiday weekend. In overnight trading, the oil market continued to trend lower as concerns over supply eased after Qatar said the U.S. and Iran had made progress in talks on matter related to the memorandum of understanding. The crude market sold off to a low of $67.04 by Friday morning. However, the market bounced off that level as traders covered some of their short positions ahead of the long holiday weekend amid the lack of any sign the U.S. and Iran made headway towards lasting peace during their mediated talks. The market retraced its earlier losses and posted a high of $68.80 ahead of the close. The August WTI contract settled up 11 cents at $68.69 and the September Brent contract settled up 23 cents at $71.80. The product markets ended the session in negative territory, with the heating oil market settling down 3.57 cents at $3.1822 and the RB market settling down 2.79 cents at $2.9173.
Technical Analysis: The market will likely trade sideways as it remains cautious ahead of the next meeting between the U.S. and Iran negotiators, which is scheduled to take place after July 9th funeral procession for Iran’s late Supreme Leader Ayatollah Ali Khamenei. The market’s losses will remain limited amid the news that Iran is determined to gain international recognition of its control of the Strait of Hormuz and its ability to levy fees on ships entering and leaving the Gulf even if it has to do so by force. The crude market is seen finding support at $67.04, $66.96 to $66.29, $63.86 and $63.16. Meanwhile, resistance is seen at $68.80, $70.19, $71.60, $71.86, $72.50, $73.18, $74.45, $77.34, $78.14, $79.18, $80.15 and $81.00 to $81.68.
Fundamental News: Oil agencies revised their market balances as shifts in Hormuz traffic changed supply and demand assumptions. The IEA and BloombergNEF cut projected deficits for this year to 900,000 and 500,000 bpd, respectively. The U.S. EIA increased its deficit to 3.9 million bpd, seeing slower flow normalization. Meanwhile, all three agencies see a surplus of 4 million to 5 million bpd in 2027.
UBS reduced its oil price forecasts for this year and next as oil flows through the Strait of Hormuz increased, with transits recovering to about 50% of pre-conflict levels and Iranian crude exports also regaining momentum as the U.S. blockade eases. The bank lowered its third and fourth quarter 2026 Brent forecasts to $80/barrel. It now expects Brent to average $83.74/barrel in 2026, down from its previous forecast of $93.28/barrel, and cut its 2027 forecast to $75/barrel, $10/barrel below its old estimate. UBS noted that downside risks stem from a faster reopening of the Strait of Hormuz and strong supply growth, particularly from the UAE, which could pull Brent towards $70/barrel. However, a breakdown of the Memorandum of Understanding, renewed risks to the Strait of Hormuz and Gulf oil flows could send Brent back to $100/barrel, while more severe disruption scenarios could lift prices to $120/barrel.
Baker Hughes said U.S. energy firms this week added rigs for a third consecutive week. The total oil and gas rig count increased by 7 to 580 in the week ending July 2nd, its highest level since May 2025. Baker Hughes said oil rigs increased by five to 445 this week, their highest since late May, 2025, while gas rigs rose one to 126, their highest since mid-May 2026, and other miscellaneous rigs increased by one to nine.
Traders bet the Federal Reserve policymakers have less reason to deliver an interest-rate hike later this month, after a government report showed the U.S. economy added far fewer jobs than expected in the last two months. Traders of short-term interest-rate futures now see less than a 20% chance of a rate hike in July, though they continue to see an increase in the policy rate in September as likely.
Early Market Call – as of 8:30 AM EDT
WTI – Aug $68.21, down 23 cents
RBOB – Aug $2.9598, up 3.98 cents
HO – Aug $3.2518, up 6.92 cents