Geopolitical Risks Keep Brent Crude Above $100 Despite Reported Flow Recovery

Brent Crude oil prices have remained above $100 per barrel for most of the past month, despite reports indicating that crude oil flows through the Strait of Hormuz have returned to pre-war levels. However, the market has not returned to normal, as the cost of transporting oil from the Middle East has surged due to record-high freight rates and war risk premiums. Tankers continue to face attacks in the Strait of Hormuz, forcing Gulf producers to use less efficient and more expensive alternative routes, which also delay the delivery of crude to refiners.

Refiners are struggling to maintain high processing rates to capitalize on record-high refining margins, particularly for diesel, which remains in high demand. Meanwhile, fuel exports from the Middle East are limited, Russia’s exports are non-existent due to a ban on diesel shipments, and China is prioritizing its domestic supply over exports. Global inventories have significantly decreased this year, leaving little buffer to absorb potential disruptions, especially as winter demand peaks approach.

The geopolitical situation remains the biggest uncertainty for oil prices. The market fears further escalations either before or after the U.S. midterm elections in early November, which could disrupt the recovery of oil flows from the Strait of Hormuz. The G7 group announced the release of 100 million barrels of crude oil and diesel stocks, but this had little lasting impact on prices, as the market remains skeptical about the actual availability of these reserves.

Analysts highlight several key risks that could push prices higher, including potential attacks by Iran, U.S. military actions, and disruptions in key supply routes. Saudi Aramco’s CEO Amin Nasser warned that the world’s supply resilience cushion is dangerously thin, and emergency reserves can only provide short-term relief. Until the Strait of Hormuz fully reopens and confidence is restored, oil prices are likely to remain under upward pressure.