Global oil benchmark Brent crude has remained below $100 a barrel this month despite the ongoing US-Iran conflict, even as it has rallied from previous levels. According to reports from Reuters, Brent gained around 8 per cent during the previous week and WTI almost 10 per cent, with analysts expecting the conflict to constrain Persian Gulf supplies through the remainder of 2026. The US Energy Information Administration has forecast Brent averaging around $85 during the third quarter, based on reduced oil shipments through Hormuz and declining global inventories. However, Trump's promise of petrol below $2 faces significant market skepticism, as the current national average stands at approximately $4.15 a gallon - over $2 above Trump's target. The market is moving against Trump's forecast, with Goldman Sachs warning that crude could surge to $120 a barrel if attacks on ships and energy infrastructure intensify, while a full recovery may extend into 2027.
Despite the disruption, meaningful volumes have continued moving through the Strait of Hormuz even as fighting resumed. In the week before fighting erupted again on August 30, roughly 8 million to 9 million bpd had been flowing through Hormuz, double the previous week's volume, according to Rystad Energy's Chief Economist Claudio Galimberti. While flows have since dropped to below 2 million bpd, there has been no visible very large crude carrier exiting the strait since September 2, as reported by Kpler data. During the interim U.S.-Iran peace deal in July, Hormuz exports had briefly touched pre-war levels of 16 million bpd. The daily moving average still sits around 4 million to 5 million barrels, a level that puts Brent at a "fair" price of $95, according to Galimberti. Industry estimates place daily exports somewhat higher, between 6 million and 8 million barrels. Spot premiums have climbed back to April levels, with Dubai and Oman crude trading $19 to $20 a barrel above Dubai quotes for cargoes loading in November, as reported by Reuters.
Gulf producers have found alternative routes and are expected to continue sending cargoes for ship-to-ship transfers outside of Hormuz, mitigating some of the earlier shortfall. According to reports from The Hindu BusinessLine, Saudi Aramco resumed loadings from its Ras Tanura port inside the Gulf in August, though its exports from Yanbu in the Red Sea remain under pressure from a naval blockade by the Iran-aligned Yemeni Houthis. Yanbu exports hit a six-month low of 1.429 million bpd in August, from an average of 3.9 million bpd in the previous three months, as reported by provisional Kpler data. Meanwhile, Egypt's Sidi Kerir, used as an alternative port, saw exports more than double from June levels to reach 2.139 million bpd in August. Iraq's oil exports rebounded in August to around 2.34 million bpd, while shipments from the United Arab Emirates hovered around 2.9 million bpd in August and July after hitting a record in June. Kuwaiti crude exports have recovered to about 1 million bpd in July and August, providing additional alternative export routes for Gulf producers. Iran's own exports, by contrast, have fallen sharply under the continuing US blockade.
Non-OPEC producers including the U.S., Canada and Guyana are set to increase output by a combined 1.4 million bpd this year, according to Jarand Rystad, founder of Rystad Energy, partly filling the shortfall. As reported by The Hindu BusinessLine, Russian crude exports held steady at about 5.5 million bpd in July and August, down from the 6.4 million bpd peak in June, but still 23% higher than February as processing at Russian refineries has fallen due to damage to Russian plants from Ukrainian attacks, Kpler data showed. However, Russia has downgraded its 2026 oil output forecast to a 17-year low, which may reduce its exports. Meanwhile, China slashed seaborne crude shipments to 7 million bpd in July and August, from over 11 million bpd in February, with Beijing's vast reserves estimated by Kpler at 1.17 billion barrels. However, demand destruction in petrochemicals and transportation fuels remains significant in the third quarter at 3.5 million bpd, versus 4.5 million bpd in the second quarter, with China accounting for more than half of that due to rising transport electrification and coal-based chemicals.
The physical oil market tells a tighter story than headline prices suggest. Spot premiums have climbed back to April levels, with Dubai and Oman crude trading $19 to $20 a barrel above Dubai quotes for cargoes loading in November, according to Reuters data. Oman futures stood at $104.54 a barrel while cash Dubai traded at $105.10 on Monday. "At the moment, it's telling us that physically things are incredibly tight," said David Fyfe, chief economist at Argus. "We've already got prices substantially above $100 a barrel and, even more important, you've got a diesel market that is screaming shortage." The recent escalation between the US and Iran is expected to further curb Gulf exports just as demand rises, with refiners ramping up diesel output, a fuel that has already hit a record high price in the US. Morgan Stanley now expects Brent to average $100 a barrel in the fourth quarter, while Goldman Sachs raised its Brent and West Texas Intermediate forecasts by $5 a barrel for December 2026 and 2027, citing an expectation that shipping disruptions in West Asia will persist into next year.
