Photo caption: Oil pump jacks
*Brent and WTI benchmarks pare losses after dropping more than 3%
*Yemen’s Houthis target Saudi Aramco refinery, Saba news agency says
*Iran, US make competing claims over control of Strait of Hormuz
*Both IEA and OPEC lower 2026 oil demand forecasts
Oil prices pared losses to less than 1% after dropping more than 3% earlier on Thursday, as reports that Yemen’s Houthis had targeted a Saudi Aramco refinery with drones renewed concerns over supply disruptions in an already tight global market.
The Houthis attacked an Aramco refinery in Saudi Arabia’s Jazan with two drones on Thursday, the Iran-aligned movement’s Saba news agency reported.
A Houthi military source said the attack was in response to what the group described as Saudi violations of Yemeni airspace and sovereignty in Saada and Hajjah provinces, Reuters reported. Saudi Arabia did not immediately comment on the report.
Brent futures were down 74 cents, or 0.8%, at $88.24 a barrel at 11:58 a.m. EDT (1558 GMT) , while U.S. West Texas Intermediate (WTI) crude was down 77 cents, or 0.8%, at $82.56.
Earlier in the session, both contracts slid more than 3.5% as investors focused on signs of weaker global demand and rising U.S. crude stocks.
Reports of the Yemeni attacks also sent diesel cracks to an all-time high. According to Saudi Aramco’s website, the Jazan refinery has the capacity to produce 250,000 barrels per day (bpd) of ultra-low sulfur diesel.
GLOBAL OIL DEMAND TO FALL
Limiting upward pressure, however, was data from the U.S. Energy Information Administration on Wednesday which showed that U.S. commercial crude oil inventories made their largest weekly gain since January 2023 as exports slumped. Crude inventories rose by 17.4 million barrels to 424.4 million in the week ended August 7, their highest since June 5, the EIA said.
In the meantime, OPEC lowered its world oil demand growth forecast for 2026 to 580,000 barrels per day in its monthly oil market report.
The International Energy Agency said it expected a contraction of 1.6 million bpd in consumption this year, versus a forecast of 1 million bpd last month, with demand curtailed by higher prices and restricted supply due to the U.S.-Israeli war with Iran.
COMPETING CLAIMS OVER HORMUZ
Still, supply disruptions in the Middle East and the Black Sea region continued to support oil prices, with the U.S. and Iran making competing claims over the Strait of Hormuz.
The strait is “under Iran’s control and management”, the recently appointed head of Iran’s Basij paramilitary unit said on Thursday, a day after U.S. President Donald Trump said the United States had “total control” of the strategic waterway, through which about 20% of global oil supply passed before the start of the Iran war.
U.S. Defense Secretary Pete Hegseth said Thursday that the United States military could keep a blockade on Iranian ports for as long as needed.
The market has been evaluating the actual scale of oil moving through the Strait after U.S. Energy Secretary Chris Wright said an average of 9 million bpd was transiting the waterway each week, while total flows, including volumes transported through updated pipelines and export infrastructure, were averaging 15 million bpd.
Shipping data, however, showed that vessel crossings through the strait excluding container ships dropped to five on Wednesday, their lowest in three weeks. Before the war, 125 to 140 vessels passed through the crucial waterway each day.
“Conflicting stories continue to drive the narrative as to who controls the Strait of Hormuz and just how many ships are making passage,” said Tim Snyder, chief economist at Matador Economics.
Adding to market tightness, Russia’s seaborne oil product exports in July dropped by 33.3% on a daily basis from June and 54.7% from the same month a year ago to 3.93 million metric tons after Ukrainian drone attacks led to unplanned maintenance at key domestic refineries, industry sources said and Reuters calculations show.
In the Russian city of Orsk, an oil refinery that was hit by a Ukrainian drone strike two days ago has been forced to shut down completely, and repairs could take up to six months, the regional governor said on Thursday.
