Brent Crude Struggles Near $100 Amid Supply and Geopolitical Risks
The price of Brent crude oil is hovering around the $100 per barrel mark, with several factors contributing to its struggle to surpass this psychological threshold. John Evans, an analyst at PVM Oil Associates, noted that the lack of real-time data on oil tankers passing through the Strait of Hormuz makes it difficult to assess the impact of increased attacks on shipping. Despite this uncertainty, the assumption that more crude is getting through has dampened price increases.
Evans also highlighted Saudi Arabia's unexpected cut in its official selling price (OSP) for November delivery into Asia. This move aims to make crude more marketable amid record freight rates, which have surged from $80,000 per day to $1.2 million per day for a VLCC charter from the Persian Gulf to China. The market is also watching for potential inflection points, with key events like the U.S. mid-term elections and the Israeli General Election on October 27 being closely monitored.
In a separate analysis, Naeem Aslam, CIO at Zaye Capital Markets, noted that oil is caught between improving physical supply and persistent geopolitical risk. Middle East crude exports have recovered sharply, with Gulf flows excluding Iran returning to over 81% of pre-war levels in September. However, shipping risks around the Strait of Hormuz and tensions involving Iran continue to elevate freight, insurance, and disruption premiums. Aslam also pointed out that U.S. economic data shows expansionary demand conditions, which support expectations for continued fuel consumption.
Bjarne Schieldrop, Chief Commodities Analyst at SEB, noted that last week's oil price action was distorted by the rolling of the November contract. The December Brent crude oil contract rose $4.8 per barrel, but much of this gain was due to the roll-yield. The Brent M1 contract closed the week at $102.25 per barrel, with the announcement of 100 million barrels of oil from the G7 SPR helping to ease prices at the end of last week.