West Texas Intermediate (WTI) crude oil traded near $97.00, marking a decline of about 3.4% and positioning for its first down session in five days, as markets reacted to diplomatic efforts aimed at securing shipping through the Strait of Hormuz. According to the Financial Times, Gulf foreign ministers are scheduled to meet their Iranian counterpart in Salalah, Oman, on Monday to discuss a temporary arrangement for shipping through the critical waterway, which has seen a significant reduction in vessel traffic since the onset of war on February 28. Preliminary vessel tracking showed only seven ships passing through the Strait on September 10, compared to eleven the previous day, a stark contrast to the pre-war average of roughly 125 cargo vessels daily, which previously accounted for about one-fifth of the world's seaborne crude oil and liquefied natural gas (LNG) [1].
Despite the reduced transit, Gulf producers have maintained export levels by transferring cargoes to waiting tankers outside the strait, a workaround that has driven tanker earnings to record highs and added extra costs to each shipment. Saudi Arabia's oil output in August fell by approximately 1.9 million barrels per day, and Houthi strikes targeted Saudi energy sites during the week, further exacerbating supply concerns. Meanwhile, U.S. crude inventories decreased by 300,000 barrels in the week ending September 4 [1].
On the macroeconomic front, the August Consumer Price Index (CPI) rose 0.4% month-over-month and held at 3.4% year-over-year, both matching consensus estimates. Gasoline prices surged 3.9% and contributed more than a third of the monthly CPI increase, with fuel costs up 28% year-over-year and diesel prices soaring 52%. Core CPI, which excludes energy, rose 0.3% against a 0.2% consensus and eased to 2.4% year-over-year, indicating underlying inflationary pressures even as energy prices spiked. Rate futures now price a 70% probability of a quarter-point interest rate hike on September 16, which would be the first increase of the year [1].
The International Energy Agency (IEA) released its monthly report, cutting its 2026 oil demand forecast by an additional 940,000 barrels per day, bringing the total projected decline for the year to 2.5 million barrels per day. The IEA also reported that global supply is expected to fall by 5.7 million barrels per day this year to 100.7 million, with more than 10 million barrels per day of Gulf output still shut in through August. August production was estimated at 100.1 million barrels per day, down 1.6 million from the previous month. The IEA forecasts an output rebound of 8 million barrels per day next year, contingent on the reopening of the Strait of Hormuz [1].
CONCLUSION
Crude oil markets are under pressure due to ongoing supply disruptions in the Gulf and uncertainty over shipping through the Strait of Hormuz. While Gulf producers have managed to maintain exports through alternative logistics, elevated costs and geopolitical risks persist. The IEA's outlook suggests a potential rebound in supply next year, but near-term market sentiment remains cautious amid inflationary pressures and the prospect of higher interest rates.