Oil Prices Retreat, But the Strait of Hormuz Remains the Wild Card

Tom Kool

Tue, July 28, 2026 at 8:20 AM PDT 6 min read

Trump's latest comments cooled oil prices, but talks over ending the Strait of Hormuz blockade could prove far more consequential.

Hedge Funds Pile Back into Oil as Chokepoint Risks Return

- The signing of the US-Iran Memorandum of Understanding triggered one of the largest hedge fund sell-offs for crude futures and options, however the closure of the Strait of Hormuz (and now of Bab el-Mandeb) has made bullishness in vogue again.  

- Net positions held by hedge funds and other money managers in ICE Brent futures and options rebounded to the equivalent of more than 192 million barrels, a 2-month high, in the week ending July 21.

- Interestingly, the positioning of hedge funds in Nymex WTI has been somewhat stagnant throughout June-July, suggesting that speculative market participants prefer to avoid futures contract with physical delivery. 

- As attested by last week's price rally and this week's sudden drop, lower trading activity in crude futures (open interest in ICE Brent is down 11% year-over-year) has been widening the amplitudes of price swings.

- Diesel might be the most bullish energy commodity out there, with hedge funds ramping up their net long positions held in ICE gasoil to 84,540 lots last week, higher than at any given point during the US-Iran conflict.

Market Movers

- Expand Energy (NASDAQ:EXE), the largest independent gas producer in the US, has agreed to buy privately held gas marketer Twin Eagle Holdings for $1.25 billion to boost its logistics and marketing foothold. 

- French oil major TotalEnergies (NYSE:TTE) claimed that it would appeal a Paris Court decision that ordered it to brings its business with climate change-mitigating policies under the country's corporate duty of vigilance law. 

- Africa's largest refinery, the Dangote Group operating the 650,000 b/d Lekki plant in Nigeria, raised $2.5 billion in private funding for its upcoming expansion, eyeing 1.4 million b/d capacity as soon as end-2028. 

- Russia's largest private oil firm Lukoil (MCX:LKOH) saw its divestment deadline for its international assets extended by the US Treasury Department until August 22, the 8th one-month extension already. 

The oil markets continue to trade Donald Trump's announcements, with his 'good talks' comment about the ongoing diplomatic engagements between the US and Iran sending a (temporarily) bearish signal. Omani-Iranian negotiations, however, might prove just as consequential, as media reports suggest Gulf states have coalesced around a voluntary fee proposal to end the ongoing blockade of the Strait of Hormuz. Against this background, ICE Brent is trading around $87 per barrel again, waiting for the next big geopolitical move.