Brent crude has been supported by supply risks linked to the Strait of Hormuz and by tight diesel inventories, helping keep prices near USD 94. The contract is up by nearly 20% over the month and stands almost 20% above early-August lows, though it remains below its April peak. Broader inventory dynamics have also tightened the backdrop for refined products.
The IEA said global oil inventories fell below 7.9 billion barrels at the end of July, the lowest level since April 2025. With Iranian exports already constrained by a US naval blockade, any further disruption around the Middle East could deepen market tightness. Separately, European gas prices were described as biased higher even if stockbuilding continues, albeit at a slower pace, while additional oil stock drawdowns ahead of the heating season could lift product prices further if Russian refinery throughput does not rise.
Trading Strategy Amid Bullish Market Momentum
We recommend that derivative traders position themselves for continued upward pressure on Brent crude by focusing on call options and long futures contracts. With Brent hovering near $94 a barrel—up nearly 20% from its early August lows—the market momentum is clearly bullish. Recent energy data from August 2026 shows steady weekly drawdowns in commercial crude stockpiles, which supports this near-term upward trajectory.
Geopolitical tensions around the Strait of Hormuz mean we must brace for sudden supply shocks that could spike prices overnight. Historically, threats to this vital shipping lane, which handles about one-fifth of the world’s daily oil consumption, have caused immediate double-digit price premiums. Traders should utilize out-of-the-money Brent call options as a cost-effective way to hedge against these sudden disruptions in the coming weeks.
Opportunities in Refined Products and Market Risk Management
We also see a strong opportunity in buying middle distillate crack spreads, particularly diesel and heating oil derivatives. Global diesel inventories are sitting at multi-year lows just as we approach the high-demand autumn and winter heating seasons. If refinery throughput in key regions like Russia remains limited, these refined product prices will likely surge much faster than crude itself.
Global oil reserves have recently dipped below 7.9 billion barrels, which is the lowest level we have seen in over a year. Historical data shows that when inventories drop this low, Brent prices become highly sensitive to even minor supply disruptions. We advise keeping position sizes conservative to handle the inevitable price swings, while maintaining a clear upward bias.
