Rising Dollar and Resurgent Persian Gulf Exports Pressure Crude Oil Lower

October WTI crude oil (CLV26) closed down -0.13 (-0.16%) on Friday, and October RBOB gasoline (RBV26) closed up +0.0598 (+2.00%).

Crude oil and gasoline prices settled mixed on Friday. Crude prices posted modest losses after the dollar index ($DXY) rallied to a two-week high. Additionally, signs of larger crude supplies transiting through the Strait of Hormuz weighed on the market. Losses in crude were limited, however, after President Trump signaled that the United States has no interest in returning to the terms of the deal it signed with Iran in June, casting doubt on the prospect of Middle East oil flows normalizing anytime soon.

Crude prices came under pressure amid signs of larger oil supplies leaving the Middle East. Goldman Sachs reported that oil exports from the Persian Gulf have climbed to between 15 million and 16 million barrels per day, representing roughly two-thirds of pre-war levels.

Crude prices also weakened following reports that Venezuela is considering leaving OPEC. Such a move could increase the likelihood of a price war as the remaining members of the cartel compete for customers and market share.

Earlier in the week, crude prices had dropped more than 8% to a two-week low on Wednesday amid signs of easing Middle East tensions and larger supplies of crude moving through the Strait of Hormuz. On Tuesday, the New York Times reported that the US State Department is preparing to send American diplomats back to embassies in the Middle East that were evacuated before and during the war with Iran, suggesting that the Trump administration does not anticipate a return to all-out hostilities with Iran.

US Treasury Secretary Scott Bessent said Monday that the United States will begin a campaign to sever Iran from the global economy, warning that any country doing business with Iran risks facing US sanctions. He stated that the US is focusing on five of Iran’s “most vital lifelines,” including digital assets, technology, gold, aviation, and shipping, and that countries will have a defined timeline to shut down economic cooperation with Iran. If they fail to comply, the Treasury will act unilaterally.

President Trump has noted that the US naval blockade on Iranian ports is putting pressure on the country, and he has offered no timeline for resolving the US-Iran conflict. Meanwhile, US Energy Secretary Chris Wright suggested that the United States is playing the long game with Iran, implying there are no plans to de-escalate the conflict—a factor that could limit crude supplies from the Middle East.

Crude prices also found support amid fresh Israeli attacks on Iran-backed Hezbollah in Lebanon, which dampened prospects for ending hostilities in the Middle East and a quick reopening of the Strait of Hormuz. In addition, Israel has struck Iran-backed Hamas in Gaza, Yemen-based Houthis have attacked ships in the Red Sea, and several vessels have been hit by projectiles in the Strait of Hormuz.

On a supportive note, the International Energy Agency (IEA) said in its monthly report, released on August 12, that the global oil supply deficit will worsen, even as oil demand takes a hit from the war and elevated prices. The IEA noted that global oil inventories will fall in the third quarter at twice the previously estimated rate because of ongoing disruptions stemming from the US-Iran war.

Crude also drew support from concerns that Russian crude production could be disrupted further after a Bloomberg News report on Wednesday indicated that Russia is preparing to escalate attacks on Ukraine after concluding that negotiations for a peace deal have reached a dead end.

Ukraine has intensified drone attacks on Russian oil infrastructure, curbing both Russian crude production and exports. Ukraine targeted Russian refineries, oil tankers, and major pipeline infrastructure at least 30 times in July, the second-highest monthly number of attacks since the war began in 2022. According to EA Analytics, Russian crude-processing rates averaged 3.51 million barrels per day in July, the lowest in 24 years, amid damage to Russian energy infrastructure caused by drone and missile strikes from Ukraine. The attacks knocked Russia’s crude production in July down to 8.89 million barrels per day, the lowest in six years, according to secondary source estimates published by OPEC. Meanwhile, Reuters reported on Friday that Russia’s gasoline production fell to approximately 80,000 tons a day in August, meeting only 70% of domestic demand and leading to shortages throughout the country.

On the bearish side, OPEC delegates approved on August 2 their final increase of +188,000 barrels per day in crude production for September. The group has now restored all of the 1.65 million barrel-per-day supply cutback it implemented in 2023 and said it plans to hold output steady for the remainder of the year after the September hike. These production increases by OPEC+ might prove difficult to achieve amid renewed US-Iran military activity in the region. OPEC’s July crude production rose by +1.16 million barrels per day to 19.44 million barrels per day.

Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least seven days fell 11% week-over-week to 97.71 million barrels in the week ended August 21.

Wednesday’s EIA report showed that US crude oil inventories as of August 21 were 1.3% above the seasonal five-year average, gasoline inventories were 5.9% below the seasonal five-year average, and distillate inventories were 14.6% below the five-year seasonal average. US crude oil production in the week ending August 21 rose 0.1% week-over-week to 13.843 million barrels per day, just below the record high of 13.862 million barrels per day posted in November 2025.

Baker Hughes reported Friday that the number of active US oil rigs in the week ended August 28 fell by five to 447 rigs, modestly below the one-and-a-quarter-year high of 455 rigs from the week of August 14.

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