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OIL5 min read

Oil slips below $100 as Gulf flows recover

Brent fell 2.57% to about $99.7 a barrel in Friday trading, per Trading Economics, and WTI 2.71% to $90.35 as crude shipments through the Strait of Hormuz returned to their pre-war baseline, though Brent is still about 54% higher than a year ago.

CommoditiesMacroJuniorTrader desk · 5 sources

  • Brent fell 2.57% to about $99.7 a barrel in Friday trading, per Trading Economics, as crude flows through the Strait of Hormuz returned to their pre-war baseline.

  • The physical squeeze is easing but the war premium isn’t: Brent is still about 54% higher than a year ago, and energy is driving this autumn’s inflation and rate hikes.

  • Watch for any response to Iran’s seven-day offer and the reported plan to resume bombing after November’s midterms, then weekly Hormuz flows and energy inflation.

The trader’s angle

The physical squeeze behind this year’s oil shock is easing but the war risk isn’t. With energy driving this autumn’s inflation and rate hikes, oil’s next move matters well beyond the energy desk.

The chart

Brent over the past year.

Brent

Brent crude

about $99.7

down-2.57% on Friday

Intraday on Friday, per Trading Economics. Still about 54% higher than a year ago, but more than a fifth below its wartime peak of over $126 on 30 April. WTI fell 2.71% to $90.35.

Crude through Hormuz

13.5m b/d

up7-day average, late Sep

In line with the pre-war baseline for shipments through the strait, according to CNBC. Refined-fuel shipments remain constrained.

Middle East crude exports, Sep

16.3m b/d

upHighest since the war began

Preliminary Kpler data. Saudi Arabia more than doubled its exports, from about 2.45m b/d in August to around 5.4m b/d.

Gulf crude bypassing Hormuz

~40%

upvs 17% before the war

Saudi and UAE pipelines now carry a much bigger share of Gulf crude around the strait, so less of the region's supply depends on it.

An oil price bundles two things. The first is the physical balance: how many barrels are actually reaching refiners compared with how many they need. The second is a : what buyers will pay today as insurance against supply being cut off tomorrow.

The two move at different speeds. When tankers start moving again, the physical squeeze eases quickly and prices fall. The premium fades only when the threat does, which is why oil traders watch diplomatic headlines as closely as tanker data. Friday’s slide below $100 reflects the first part easing; the second hasn’t gone away.

What happened

crude fell 2.57% to about $99.7 a barrel in Friday trading, according to Trading Economics. That took it below $100 and towards a sharp weekly drop. , the US benchmark, lost 2.71% to $90.35.

The fall caps a week of evidence that Gulf oil is flowing again. By late September, crude passing through the had reached a seven-day average of 13.5m barrels a day (b/d), in line with the pre-war baseline for shipments through the strait, according to CNBC.

Exports rose with it. Middle East crude exports reached about 16.3m b/d in September, their highest monthly level since the war began, on preliminary data from Kpler. Saudi Arabia more than doubled its exports, from about 2.45m b/d in August to around 5.4m b/d.

Oil is far from cheap, though. Brent is still about 54% higher than a year ago, even if it now sits more than a fifth below its wartime peak of over $126, set on 30 April.

The backstory

The US and Israel began strikes on Iran on 28 February, and Iran responded by closing the Strait of Hormuz. Before the war, about 25% of the world’s seaborne oil trade and 20% of its passed through it.

The US began an air campaign to reopen the strait on 19 March. On 27 March, Iran’s Revolutionary Guards (IRGC) said the strait was closed to vessels going to or from the ports of the US, Israel and their allies. On 13 April the US imposed a naval blockade on Iran.

The Gulf has also found other ways out. About 40% of Gulf crude now bypasses Hormuz through Saudi and UAE pipelines, against 17% before the war. Gas has been slower to recover: several Qatar-linked LNG tankers crossed the strait in September, after none in August, but normal exports have not resumed.

How it ripples through markets

How recovering Gulf flows pull oil lower, for now

  1. 1

    Gulf crude finds a way out

    upGulf crude flows

    Pipelines now carry about 40% of Gulf crude around Hormuz, against 17% before the war, and transits through the strait reach a seven-day average of 13.5m b/d, in line with the pre-war baseline.

  2. 2

    Exports hit a wartime high

    upMiddle East exports

    Middle East crude exports reach about 16.3m b/d in September, and Saudi Arabia more than doubles its shipments to around 5.4m b/d.

  3. 3

    The physical squeeze eases

    downBrent

    With more barrels reaching buyers, there's less need to pay up for supply: Brent falls 2.57% to about $99.7 in Friday trading, per Trading Economics, and WTI 2.71% to $90.35.

  4. 4

    Inflation pressure could cool

    Energy is the main driver of this autumn’s inflation and rate hikes. Cheaper oil, if it lasts, feeds through to fuel and energy prices, so central banks face less pressure to keep hiking.

  5. 5

    But the war premium stays

    The US has rejected Iran's offer to reopen the strait, and Trump reportedly expects to resume bombing after the midterms, so the risk of fresh disruption is still in the price.

Why it matters for traders

The physical squeeze is easing; the political risk isn’t. Iran’s foreign minister, Abbas Araghchi, offered to reopen the strait and restart nuclear talks within seven days if the US met Tehran’s conditions, including an end to what it calls acts of aggression. On 26 September President Trump rejected the proposal, and he has reportedly told aides he expects to resume bombing after November’s midterm elections.

That keeps a in the price even as tankers move. A deal could squeeze more of it out, while renewed strikes could put it back in a hurry. Crude isn’t the whole energy story, either: refined-fuel shipments are still constrained and Qatar’s LNG exports aren’t back to normal, so fuel and gas markets have less slack than the crude numbers suggest.

And oil is now the macro story. Energy is the main driver of this autumn’s inflation and rate hikes. Euro-zone energy inflation hit 18.8% in September, the Fed, the ECB and the Bank of Japan have all raised rates, and bond are at multi-decade highs. If Brent stays below $100, energy inflation would cool and central banks would feel less pressure to hike, which gives rates traders as much reason to watch oil as energy desks have.

What to watch

Diplomacy first. Any movement on Iran’s seven-day offer, or any sign that the reported plan to resume bombing after the midterms is hardening or fading, is likely to move the risk premium faster than shipping data can.

Then the flows. Weekly Hormuz transit figures and monthly export estimates will show whether crude keeps moving at pre-war rates, and whether refined fuels and Qatari LNG follow it.

Finally, the pass-through. A sustained drop in oil would show up first in energy inflation, which hit 18.8% in the euro zone in September, and then in how hard central banks lean on rates. One day below $100 won’t change that picture; a drop that lasts would.

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Sources

Written by the JuniorTrader desk with AI assistance, from the reports above. Intraday levels are snapshots and may have moved since. Not investment advice.

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