Crude Oil Prices Drop Amid Ongoing Physical Tightness Concerns

Crude oil prices have dropped in recent weeks, but experts say that physical tightness in the market is still a concern. The price of Brent crude surged from near $90 at the end of August to $110 in mid-September before retracing to below $98.

The strongest evidence of physical tightness came during the peak escalation phase when the EFP, or the premium of physical Dated Brent barrels over futures, surged from negative territory at the end of August to nearly $25. This indicates that spot market supply was severely disrupted due to the conflict in the region.

However, the diplomatic picture is adding uncertainty to the situation. US President Trump described his meeting with Iran's delegation as 'very good' and indicated further discussions are scheduled. Meanwhile, Qatar has confirmed active back-channel communications between Washington and Tehran.

The market appears to be pricing a smooth path to de-escalation, but physical signals suggest that this path has several unresolved steps ahead of it. If the pipeline restoration completes on schedule and diplomatic momentum from UNGA holds, Brent has room to ease further toward the $94 to $96 zone.