WTI Holds Spike After Big Crude Draw, SPR Drain Continues As Cushing Stocks Stuck At ‘Tank Bottoms’
Oil prices are jumping higher after the U.S. military intercepted Iranian ballistic missiles aimed at American forces in Jordan.
Shortly after the surprise attack, the U.S. and Saudi Arabia launched strikes in Iraq against Iran-backed groups that the Islamic Revolutionary Guard Corps previously directed to attack American troops and Saudi energy infrastructure.
As Barron’s Patrick O’Donnell reports, the escalation in hostilities hit market hopes that the vital Strait of Hormuz waterway would reopen. More than a quarter of the world’s crude usually passes through the shipping channel and tanker traffic remains essentially halted.
“These developments throw cold water on the idea of a swift de-escalation in the Persian Gulf,” analysts at ING said.
“Clearly, with Saudi oil infrastructure increasingly targeted, the risk of more prolonged supply disruptions grows.”
President Trump this morning threatened to hit Iran “hard,” while the US and Saudi Arabia retaliated against militia and weapons sites in Iraq linked to Tehran.
Overnight, we saw API report a sizable crude draw but product builds (as the crack spread has eased somewhat)…
API
Crude -3.3mm
Cushing -300k
Gasoline +900k
Distillates +400k
DOE
Crude -7.17mm
Cushing -771k
Gasoline +7k
Distillates +1.06mm
The official DoE data shows a much larger crude drawdown than expected, and another drop in the stocks at the crucial Cushing Hub. Products saw small builds…
The Trump administration continues to drain the Strategic Petroleum Reserve
Cushing stocks remain near ‘tank bottoms’…
US crude production remains just off record highs…
WTI is holding back above $84.50…
Finally, as Bloomberg’s Michael Ball notes, the selloff earlier in the week was driven more by liquidation than normalization. Observable Hormuz traffic remains impaired, insurers and shipowners are cautious, not only through the Strait but now in the Red Sea. Trend-following funds cut Brent length sharply, while falling aggregate open interest shows positions were closed into heavy volume earlier in the week before the latest escalation.
The curve and options markets tell a similar story. Brent and WTI backwardation narrowed as longer-dated spreads fell to their weakest since mid-July, reflecting less urgency around prompt supply. Brent implied volatility dropped this week before firming again overnight. However, call skew retained an upside bias, something be justified by oil prices on the rise again.
The tighter market is in products. The European gasoil crack has surged above $70 a barrel as refiners run near capacity, with diesel and jet supplies constrained by outages, shipping risks and reduced Russian exports.
Crude stocks can rebuild quickly; refining capacity cannot. Headline prices remain sensitive to kinetic and diplomatic developments, while product scarcity and impaired shipping mean the bottom of a developing trading range will be higher than the recent lows suggest for now.
Tyler Durden
Wed, 07/29/2026 – 10:36