Brent Rose a Fourth Straight Session and the US Reserve Fell Below 300 Million Barrels

Brent gained 5.15 percent on Monday to 87.45 dollars a barrel, a fourth consecutive rising session and the highest in nearly two weeks. A week ago it was at 83.88 and falling, after Trump called off a planned strike on Iran at the request of Gulf allies. That optimism has now drained out again, and the reason is what Tehran is asking for in return.

Iran wants the United States to lift its naval blockade and pay war compensation before the Strait of Hormuz reopens. Those are not negotiating positions that resolve in an afternoon. Meanwhile Houthi forces have claimed further strikes on Saudi refineries and tankers have come under attack inside Hormuz waters, so the physical risk has not eased while the diplomatic timetable slipped.

The buffer is close to gone. US Strategic Petroleum Reserve inventories have fallen below 300 million barrels, the lowest level since 1983, after eighteen consecutive weekly declines. That reserve is the instrument Washington has used to cap every previous price spike, and at this level using it becomes a political decision rather than a technical one. Refilling it at 87 dollars a barrel is not a decision anyone wants to sign either.

On the supply side the arithmetic went the other way this month. OPEC+ agreed another 188,000 barrels a day for September at its meeting on the 2nd of August, completing the rollback of the 1.65 million barrels of voluntary cuts agreed in 2023. A 2 million barrel a day reduction dating from 2022 stays in place until the end of the year. So the group has added everything it was going to add.

That combination is why the market keeps whipsawing. Every headline about the Hormuz talks moves Brent five percent because the physical situation is genuinely unresolved, tanker transits are running roughly 90 percent below normal, and there is no inventory cushion left to absorb the difference. Brent closed at 100.69 on the 23rd of July and at 83.88 a week ago. That is the range for one commodity in three weeks.

Energy was the one sector that worked on Monday while the broader indices slipped, with Exxon rising alongside crude. That is the trade now. Not a view on demand, not a view on OPEC, just a position on whether a temporary agreement over one waterway gets signed this month or next. Everything else in the energy complex is currently a derivative of that single question.