Oil: Diverging supply signals shape Brent – ING

ING’s Warren Patterson notes that ICE Brent has repeatedly dipped below $100/bbl but continues to settle above this level as the market weighs conflicting supply and geopolitical factors. Higher oil flows through the Strait of Hormuz, G7 reserve releases, and recovering Saudi pipeline capacity contrast with persistent Middle East tensions and unchanged OPEC+ production plans.

Brent holds above key threshold

"Reports are that flows are back to more than 80% of capacity, which will allow crude exports from Yanbu to also recover."

"The latest positioning data shows that speculators reduced their net long in ICE Brent by 13,812 lots over the last reporting week to 204,302 lots, which is the smallest position held since early August. Signs of increased oil flows from the Persian Gulf would likely leave speculators reluctant to carry too much risk at the moment."

"Unsurprisingly, OPEC+ over the weekend left production levels unchanged for November. Throughout the US-Iran conflict, the group announced cumulative supply increases of 1.65m b/d. However, these were largely paper increases, as ongoing supply disruptions prevented a corresponding rise in actual production."

"Despite ICE Brent breaking below $100/bbl several times last week, the move was relatively short-lived. The market continues to settle above this key level as it digests a number of diverging developments. On the bearish side, oil flows through the Strait of Hormuz appear to be trending higher."

"Further reinforcing expectations of looser crude oil market conditions, Saudi Arabia reduced the official selling price for November-loading Arab Light crude into Asia by $3/bbl, widening its discount to the benchmark to $5/bbl. The Saudis have been shipping larger volumes through the Strait of Hormuz in recent weeks, given the outage of the East-West pipeline. More recently, oil flows through the pipeline have been recovering."