Brent: Geopolitics keep rally supported – ING

ING analysts Warren Patterson and Ewa Manthey note that Brent has broken above $100/bbl for the first time since July, driven by persistent geopolitical risk in the Persian Gulf and limited prospects for de-escalation between the US and Iran. They highlight upside risks from potential disruptions to Strait of Hormuz flows and emphasize that Chinese crude buying behaviour will be crucial for the sustainability of the current Oil rally.

Brent extends gains on risk premium

"ICE Brent pushed through $100/bbl yesterday for the first time since July, and that momentum has carried into early‑morning trading today. The move reflects a market still pricing in persistent geopolitical risk, with Persian Gulf tensions showing no credible path to de‑escalation. If anything, current signals point to further escalation, keeping upside pressure firmly in place."

"Iran said it is ready to intensify the war, while President Trump said that the war is likely to continue until just after the midterm elections in early November. The risk is that escalation starts leading to meaningful disruptions to Strait of Hormuz flows. Oil flows have surprised to the upside in recent weeks, but the market could tighten more sharply if ongoing escalation translates into disrupted oil flows once again."

"Adding to the bullish sentiment is China's increased activity in the physical market, particularly in the North Sea, where Dated Brent has seen more strength. China, through much of the war, has helped to rebalance the market through lower crude oil imports. While imports remain well below year-ago levels, they've started to recover from the lows seen in June; recent physical-market activity suggests this could continue."

"Crucial to the outlook — and to how much momentum this latest move can sustain — is Chinese buying behaviour. It will largely determine whether this rally has follow‑through or fades."

"Overnight API data shows US crude oil inventories fell 300k barrels over the last week. Refined products saw gasoline stocks fall by 1.9m barrels, while distillate inventories grew by 2m barrels. The more widely followed EIA inventory report will be released later today."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)