Oil Retreats After Breakout Above June High Fails

Oil markets have shown a remarkable ability to shrug off geopolitical and physical disruptions this year.

Crude oil opened higher and climbed to an intraday high of $94.37 a barrel before giving back most of those gains. It now trades 88 cents higher at $92.30.

Brent crude turned briefly negative earlier in the session.

The day's price action could represent a false breakout above the June high. Oil has been consolidating near that level, but momentum has been fading after a run-up from $80. The session included positive news for oil, yet it was unable to complete the breakout. That raises the question of whether prices can rally on good news.

Over the weekend, the United States struck three Iranian tankers, sinking one. This followed Iranian attacks on US ships and bases in the region. The Yemeni Houthis also carried out strikes that shut down some Saudi oil infrastructure.

Overall, the outlook for oil remains bullish. It is difficult to quantify how much crude the Hormuz conflict is removing from global markets, but the amount is significant. China has dramatically slowed its imports, and the US is using the Strategic Petroleum Reserve, but that is not sustainable. The supply squeeze is coming, and it will take time to restore normal operations after the conflict ends. For now, the pain is reflected in record diesel prices, and it will not be long before that pressure reaches crude.