Brent Crude Faces Volatility Amid Hormuz Supply Risks
Brent crude oil prices are expected to remain volatile throughout October, driven by persistent concerns over supply disruptions in the Strait of Hormuz. Analysts note that while alternative shipping routes are helping to mitigate some of the supply issues, the risk premium remains high due to ongoing uncertainties. Amit Gupta of Kedia Stocks & Commodities Research highlights the market's directional volatility, attributing it to the tension between disrupted Hormuz shipments and recovering Gulf exports through other channels.
The October Brent crude contract on the Multi Commodity Exchange of India is projected to trade between INR 8,150 and INR 9,645 per barrel. Meanwhile, the December Brent contract on the Intercontinental Exchange is anticipated to fluctuate between $90.00 and $109.80. Analysts at Kotak Securities expect Brent to peak near $110, with key support levels at $95 and $92. The market's tightness is emphasized by Anindya Banerjee of Kotak Securities, who points to sharply drawn-down inventories despite some supply relief from alternative routes.
Gulf producers, such as Saudi Arabia and the UAE, have been utilizing pipelines to bypass the Strait of Hormuz, partially offsetting the supply disruptions. However, these alternative routes are insufficient to eliminate the strait's critical role in global oil shipping. The market remains sensitive to geopolitical developments, particularly the US-Iran talks and the pace of Gulf export recoveries. Analysts predict a wide trading range for Brent, dependent on whether supply normalization progresses or disruptions worsen.
Additional uncertainties stem from refined product availability, with China's suspension of fuel exports exacerbating the global diesel market's tightness. The Group of Seven's planned release of 100 million barrels from emergency reserves aims to ease supply pressures but is unlikely to eliminate volatility as long as the war in West Asia persists. Analysts like Karthick Jonagadla of Quantace Research suggest that sustained export recoveries could compress the geopolitical premium, while renewed disruptions could push Brent towards $115-120.