Brent: Middle East risks support prices – ING

Source Fxstreet

ING analysts Warren Patterson and Ewa Manthey note Brent is up around 3% as Saudi Arabia’s East-West pipeline shutdown intensifies supply concerns following recent attacks. They highlight elevated geopolitical risk around the Strait of Hormuz, tight middle distillate markets with record gasoil and diesel cracks, and still-strong inventory draws despite the IEA’s aggressive demand forecast cuts, while keeping a base case of Brent averaging $80/bbl in 4Q26.

Pipeline shutdown and crack strength

"Following last week's developments, it’s not surprising that oil prices are trading higher this morning, with ICE Brent up around 3%. This follows a step-up in attacks on Saudi Arabian energy infrastructure, including targeting the crucial East-West pipeline, a vital bypass route for Saudi oil exports during disruptions through the Strait of Hormuz. The Saudis have shut down the 7m b/d pipeline."

"Clearly, the recent escalation poses risks to our forecast, pushing us closer to our more pessimistic scenario. For now, we’re sticking with our base case of Brent averaging $80/bbl in 4Q26. The situation is fluid as we continue to see sizeable volumes of oil still moving through the Strait of Hormuz."

"In its monthly oil market report on Friday, the IEA made additional aggressive cuts to its demand forecasts for this year, given ongoing disruptions in the Middle East. It now forecasts global oil demand to fall by 2.5m b/d YoY this year, 940k b/d more than its previous forecast. For 2027, the agency expects demand to recover, growing by 2.6m b/d YoY."

"Middle distillate markets continue to scream tightness. The ICE gasoil crack is trading at fresh record highs of around $84/bbl this morning; US diesel cracks have broken above $110/bbl. Strength in the middle distillate market prompted President Trump to pressure Ukraine to stop targeting Russia's refinery infrastructure."

"The growing scale and intensity of Ukrainian attacks on Russian refineries this year have pushed Moscow to ban diesel exports. This has only tightened global markets, following Persian Gulf disruptions. The ban, extended twice since taking effect in July, is set to expire at the end of September."

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

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