Oil Is Still Finding Away. The Energy Report 07/07/2026

They give you an inch in the strait they will take a mile. Oil prices moved higher after as the Wall Street Journal reported that Iran’s Islamic Revolutionary Guard Corps fired missiles at two commercial ships near the Strait of Hormuz early Tuesday, according to a senior U.S. official, marking an escalation that threatens to complicate negotiations to end the U.S.-Iran war. Yet at the same time oil keeps moving and physical oil markets are falling as Saudis cut prices and premiums implode and gas prices according to AAA gas prices are at 3.79 today, down modestly from a week ago ($3.847). The bigger story is the month-over-month drop — down about 38 cents from $4.174 a month ago, roughly a 9% decline
The Journal says that “The attacks come as Iranians mourn Ayatollah Ali Khamenei, the former supreme leader killed at the start of the Iran war. They also follow stepped-up threats by the powerful paramilitary force, which has been undermining talks and warning vessels not to transit the waterway using a route cleared by the U.S. military near the coast of Oman. “Our missiles and drones are ready to fire at you,” the Revolutionary Guard warned ships via maritime radio over the weekend, according to a recording shared with The Wall Street Journal.
The move to attack ships with missiles amid talks to end the war demonstrates the power wielded by the Revolutionary Guard, which has been at odds with more moderate voices in the Iranian leadership. In Iran, the Revolutionary Guard and those close to it have stood as the biggest obstacle to an agreement, the Journal has reported. Under a memorandum of understanding, the U.S. and Iran agreed last month to a 60-day period of negotiations to reach a final agreement.
Even with the headline risk, the market is taking some comfort from reports that oil continues to move through the region. Hormuz tanker traffic is gradually recovering despite persistent risks, with outbound vessels gaining momentum after months of delays.
Inbound transit remains more cautious, but activity is improving, according to Tsvetana Paraskova of Oilprice.com.
In another encouraging sign, Indian state refiners are returning to Iraqi crude purchases that would transit the Strait of Hormuz.  That move suggests the world’s third-largest crude oil importer is eager to secure Middle East supply as the chokepoint tentatively reopens.
State-owned Mangalore Refinery and Petrochemicals Limited (MRPL) has chartered a tanker to load crude from Iraq, becoming the first Indian state refiner to do so since tankers began moving inbound again. MRPL booked the Aframax tanker Jasmin Joy to load from Iraq’s Basrah oil terminal on July 19–20, according to Oil Price.
India has still faced challenges chartering vessels amid elevated freight costs and uncertain transit terms. At the end of June, Indian Oil Corporation (IOC) received no bids for a tender to charter three tankers for Persian Gulf crude and gas.
This comes as reports say that India’s power demand is set to grow 6% a year through 2030, a trend that should provide long-term support for crude and refined products demand in the world’s third-largest oil importer.
Meanwhile, TotalEnergies is offering millions of barrels of Iraq’s Basrah Medium and Basrah Heavy crudes for prompt delivery to Asia this month and next, targeting buyers in China, South Korea, and Taiwan.
Physical markets are crashing as backed- up supply hits the market, Even Russia’s oil  war windfall is gone  Urals Crashes to $42 a barrel according to Oil Price as heavy discounts and sanctions pressure are weighing sharply on Russian revenues.
India’s Power Demand Set to Grow 6% a Year Through 2030 — Strong long-term growth in the world’s third-largest importer continues to support crude and refined products demand.
The Hormuz flare-up gave crude a short-term lift, but the market is also taking encouragement from the fact that oil continues to move, even if cautiously, through the region. Geopolitical risks remain elevated yet recovering tanker traffic and renewed buying from major importers like India point to supply chains that are proving more resilient than feared. Any escalation near the Strait still bears watching, but for now the broader picture is more constructive, with the threat of major disruption appearing to ease.
On the demand side, India’s robust power growth, and signs that an oil glut may not materialize as feared provide a constructive backdrop. Russia’s revenue decline also underscores the uneven effects of today’s market dynamics.
And while many oil traders are stunned by the sharp oil price collapse — with WTI trading near $69 and Brent around $72-73 as of July 7 — we did fill the downside gap. This sets the stage for some basing action in the near term.
We have now filled the monthly breakout gap that opened at the beginning of the Iran-related disruptions and Strait of Hormuz shock earlier this year. The daily chart should still be tested near current levels or slightly lower before a more sustainable bottom forms.
Still, the real excitement remains in the crack spreads. Refining margins for gasoline and diesel surged dramatically amid the supply disruptions and product tightness before pulling back. USGC 3-2-1 cracks and diesel cracks remain elevated compared to historical norms even after easing, reflecting strong underlying demand for refined products and resilient refinery profitability despite the crude sell-off.
This divergence highlights a key market dynamic: while headline crude has given back much of its wartime premium, the product side continues to tell a story of tighter balances and better opportunities for refiners. Watch for any re-tightening in cracks as summer demand holds and inventories adjust post-disruption.
Natural gas futures are showing a little spark, helped along by building summer heat.
The August natural gas contract made a strong intraday run last week, climbing as high as $3.328, but it still could not quite push through key technical resistance — even with record heat baking parts of the eastern U.S.
In the short run, cooler weather shifts over the holiday weekend may keep upside momentum in check.
Still, there are some supportive pieces coming together: the late-June production surge is starting to fade, LNG exports remain strong, and the back-half-of-July weather outlook has added 11 cooling degree days since Thursday.
Bottom line: natural gas may stay range-bound near term, but the setup is getting more interesting as traders weigh softer short-term weather against stronger export demand and a potentially hotter second half of July.
Fox Weather Outlook: After the early-July heat dome, some relief is arriving with more seasonal temperatures, and better storm chances this week. July still leans warmer than average overall, but the short-term cooling should help keep immediate demand spikes contained.
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