WTI traded near $97.00, down about 3.4% and heading for its first decline in five sessions after the Financial Times said Gulf foreign ministers will meet Iran’s counterpart in Salalah on Monday to seek backing for a temporary shipping arrangement through the Strait of Hormuz. Preliminary vessel tracking showed seven ships transiting on 10 September versus eleven a day earlier, well below the roughly 125 cargo vessels a day seen before the war began on 28 February, when the route carried about one-fifth of the world’s seaborne crude oil and LNG. Gulf producers have sustained exports via shuttle loading, pushing tanker earnings to record levels, while Saudi Arabia’s August output fell by around 1.9 million barrels a day and US inventories fell a further 300K barrels in the week to 4 September.
In the US, August CPI rose 0.4% m/m and held at 3.4% y/y; gasoline rose 3.9% and accounted for more than a third of the monthly increase, while fuel costs were up 28% y/y and diesel 52%. Core CPI increased 0.3% versus 0.2% consensus and eased to 2.4% y/y, as rate futures priced a quarter-point move on 16 September at roughly 70% with the target range still 3.50% to 3.75%. The IEA cut 2026 demand by a further 940K bpd, taking the full-year decline to 2.5 million, and sees supply down 5.7 million bpd this year to 100.7 million; August production was 100.1 million bpd, down 1.6 million m/m, with output forecast to rebound 8 million bpd next year. Global stocks have fallen 507 million barrels since 28 February—an average draw of 2.8 million bpd—with 95 million removed in August, while the Gulf recovery is pencilled in for 2027; Brent trades above $100.00 after one bank lifted its year-end forecast by $10.00, and probabilities for a September hike were put near 70%, 57% and 49% across different venues.
Strategic Positioning for Derivative Traders
As we navigate the coming weeks, we believe derivative traders should prepare for heightened volatility and position for an upward bias in WTI Crude. Despite the temporary 3.4% dip to around $97.00 on news of the Salalah talks, the structural reality of the oil market remains incredibly tight. We recommend holding long positions or buying call options as long as WTI stays above the key support level of $95.50.
Market Imbalances and Policy Implications
Our bullish outlook is heavily reinforced by massive global supply deficits that cannot be solved by diplomacy alone. Since early 2026, global inventories have plunged by 507 million barrels, forcing the market to run on dangerously low reserves. Historically, the Strait of Hormuz carries about 20.5 million barrels of oil per day—roughly one-fifth of global consumption—making any alternative shipping workarounds extremely expensive and unsustainable.
Furthermore, we must closely watch the Federal Reserve’s rate decision on September 16, where a quarter-point hike is highly anticipated due to persistent inflation. Recent data shows energy costs continue to drive consumer prices, with gasoline alone accounting for over a third of the August CPI monthly increase. Because higher interest rates cannot magically produce more physical crude or reopen blocked shipping lanes, we expect any rate-induced market dips to be short-lived buying opportunities.
