Middle East Oil Exports Recover, but Brent Prices Stay High

The Brent crude oil market has shown resilience despite the recovery of Middle Eastern oil exports. According to Kpler, average oil shipments from Saudi Arabia, the UAE, Qatar, Bahrain, Kuwait, Oman, and Iraq totaled 16.3 million bpd in September, or more than 80% of the 12-month average before the conflict began. The release of 40 million barrels from US strategic reserves was met with relatively weak demand of just 500,000 barrels.

Iran's loss of control over oil exports from the Middle East has reduced its negotiating power in talks with the US. However, the country still faces significant pressure from the US military blockade, which is putting a strain on its budget and economy. Tehran now faces two broad options: enter negotiations or resume attacks on energy infrastructure across the region.

A potential escalation of the conflict could carry significant implications for oil supply and prices. The spread between November and October futures contracts widened to around $7 per barrel, suggesting growing concern about a potential escalation. Despite this, a further surge in oil prices may be constrained by the slow recovery in refined-product exports.