Oil rallies past $93 on Hormuz risk despite broad US inventory builds
Crude prices surged past $93 a barrel as geopolitical risks in the Strait of Hormuz overshadowed broad inventory builds and marginally weaker US demand.
US commercial crude stockpiles rose by 2 million barrels to 411.7 million barrels in the week ending July 17, according to the Energy Information Administration. The build was slightly smaller than the 2.603 million-barrel increase reported a day earlier by the American Petroleum Institute. Gasoline inventories added 800,000 barrels, reversing the prior week's 1.5 million-barrel draw, while distillate stockpiles grew by 1.4 million barrels.
Despite these broad inventory builds, crude futures surged in morning trading. Brent crude jumped 2.56%, or $2.33, to trade at $93.34 a barrel at 9:52 a.m. in New York. WTI gained $1.97 to reach $86.31, a 2.34% increase on the day.
The price action underscores how geopolitical risk is currently overriding domestic supply and demand fundamentals. Traders bid up contracts as a deal between the US and Iran to restore shipping through the Strait of Hormuz remained elusive. Brent has now climbed roughly $9 over the past week, reflecting a significant risk premium tied to potential supply disruptions in the critical waterway.
Beneath the geopolitical noise, the underlying US demand picture remains relatively soft. Total products supplied—a key proxy for oil demand—averaged 20.4 million barrels per day over the last four weeks. That figure is down 1% compared to the same period last year, suggesting recent economic headwinds are weighing on overall fuel consumption.
Gasoline demand specifically averaged 8.9 million barrels per day over the four-week period. To meet this demand and rebuild stocks, refiners increased gasoline production to an average of 9.7 million barrels per day. Distillate production also ramped up, averaging 5.3 million barrels daily.
The distillate market has shown more resilience than gasoline, with four-week average demand reaching 3.7 million barrels per day. This represents a 2.2% year-over-year increase, offering a bright spot for industrial and heating fuel consumption.
Even with the recent widespread builds, overall inventory levels remain historically tight and provide a fragile backdrop for the market. Commercial crude stockpiles sit 6% below the five-year seasonal average for this time of year. Distillate inventories are even tighter, lingering 10% below their five-year average, leaving the market highly vulnerable to any actual supply shocks in the Middle East.
