Oil prices surged after hostilities between the US and Iran resumed in the middle of July. US strikes on Iranian military infrastructure and the reinstatement of a blockade on Iranian crude exports pushed Brent crude above USD 100 per barrel for the first time since May. Prices later retreated after both sides agreed to pause attacks, but uncertainty remains high. Negotiations led by Oman aim to reopen the Strait of Hormuz through a regional traffic management arrangement, although significant political obstacles remain. At the same time, risks have shifted partly to the Red Sea, where renewed Houthi attacks on Saudi oil facilities have reduced traffic through the Bab el-Mandeb Strait and intensified concerns about global supply disruptions.
On the supply side, India continues diversifying crude imports. Efforts to reduce reliance on Russian oil were complicated by disruptions in Middle Eastern supply following the Hormuz closure. Imports from the region fell sharply, while purchases from Russia increased. Indian refiners have also expanded sourcing from Venezuela, Angola, Brazil, and other producers to improve supply security.
Though they have recovered slightly in July, Chinese crude consumption figures are underwhelming. Imports dropped to a decade low in June, partly because previously accumulated inventories reduced the need for new purchases. Structural factors are also emerging, including rapid electric vehicle adoption and government initiatives to electrify trucking. Although imports recovered somewhat in July as transit conditions improved, analysts remain cautious about longer-term demand growth.
The downstream market remains strong. Refinery outages and fuel supply shortages in Russia and the Middle East have boosted refining margins globally. US refineries have responded by increasing utilization rates to over 96 per cent, raising exports of diesel and jet fuel and benefiting from record refining margins despite concerns about low strategic and commercial crude inventories.