Supply Pressure Through Hormuz Weighs on Oil Market Despite 1.67% Brent Decline
Key Facts
The oil market is facing simultaneous pressure on supply, logistics, inventories and refining, according to an ANZ Research note cited by Reuters in a report published by KELO-AM. Crude exports from the Gulf fell for a fourth consecutive week, while flows through the Strait of Hormuz dropped to about 60% of their normal level, according to the same report. Before the conflict broke out in February, the strait carried about one-fifth of global energy supplies, highlighting its role in international energy flows. A Reuters report, citing data from the Washington Institute for Near East Policy, said October was the worst month for commercial shipping attacks in the strait and nearby waterways. These developments put shipping and supply at the center of attention in the crude market, alongside developments in diplomatic efforts.
Pressure has also extended to refined products, with global distillate inventories remaining about 5% below their five-year average, according to the Reuters report cited by KELO-AM. The shortfall comes as the market faces bottlenecks in inventories and refining, as well as supply and transport, according to ANZ Research. The International Energy Agency recorded a 10 million-barrel decline in observed global oil inventories during September. At the end of the month, inventories were 509 million barrels below end-February levels, according to the agency. These figures show that available inventories continued to shrink over the period covered by the report, alongside disruption to crude flows through the Gulf.
Despite tight supply, Brent futures fell $1.93, or 1.67%, in the October 27 session to settle at $113.88 a barrel, according to Reuters via Investing.com. In trading on Thursday, October 29, as of 0132 GMT, Brent was down 82 cents, or 0.7%, at $114.50 a barrel, according to a Reuters report published by Euronext. The decline followed a 1.3% rise in the contract in Wednesday's session, the report said. It added that hopes of a settlement eased market concerns about an expansion of the conflict in the Middle East, while attacks and supply risks kept shipping in focus. Session moves show that prices fell in some trading despite the continuing supply disruption cited by the sources.
In a separate estimate, the U.S. Energy Information Administration raised its forecast for the average Brent price in the fourth quarter of 2026 to $105 a barrel, up $14 from its September estimate. The agency linked its forecast to production disruptions and estimated that average oil production shut in because of restrictions would reach 4.5 million barrels per day in the fourth quarter. It forecast, however, that average Brent would fall to $87 in the second quarter of 2027, then to $74 in the final quarter of the same year. On the demand side, the International Energy Agency forecast that global oil demand would decline by an average of 2.6 million barrels per day in 2026. The agency estimated a year-on-year decline of 2.5 million barrels per day in the fourth quarter, outlining a demand trajectory distinct from current supply pressures.
On financial institutions' forecasts, UBS raised its end-2026 Brent estimate to about $110 a barrel from $100, according to Reuters in a report published by Investing.com and another via Euronext. UBS said its forecast reflects supply volatility in the Middle East and geopolitical uncertainty, and expected prices to remain near $110 through year-end. The bank's estimate comes as ANZ Research has pointed to pressure spanning supply, logistics, inventories and refining. EL7 data for the BZUSD symbol recorded a close of 115.32 on October 28, followed by 110.8 on October 29, without specifying the currency. EL7 data also recorded an ANZGY close of 28.04 on October 28, without specifying the currency; the available information does not verify the ANZ forecasts attributed in the previous draft.