Middle East supply disruptions ease to 3.8 million barrels per day as Brent falls 21%
Key Facts
Brent crude prices fell about 21% from the start of November through November 11, while West Texas Intermediate was down 17%, amid hopes of an end to the war and the return of some Middle East supply. In the same session, the Brent futures contract rose $1.27, or 1.39%, to settle at $92.76 a barrel, after Iranian remarks raised supply concerns and lifted prices from two-month lows. Supply-tracking data cited by Reuters from Kpler showed that disruptions to crude and condensate in the region had fallen to about 3.8 million barrels per day through November 11. Crude output in Saudi Arabia and Iraq returned to pre-war levels, signaling improved supply. But continued risks in shipping lanes leave that improvement vulnerable to reversal.
The U.S. Energy Information Administration said oil exports from the Middle East edged higher in October after the Saudi East-West pipeline resumed operations. It added that oil flows through the Strait of Hormuz, using ship-to-ship transfers near the coast of Oman, also lifted supply. Its report estimated average Middle East oil production shut-ins at 2.5 million barrels per day in October, compared with a peak of 10.9 million barrels per day in May. The difference reflects a significant contraction in the volume of disrupted production over the intervening months. Still, continued supply constraints mean that the return of some flows does not amount to a full recovery of the market to its previous state.
Improved crude flows came alongside continued high transportation costs imposed by the war, insurance premiums and tanker rates. OilPrice reported that the cost of transporting a barrel rose from about $5 before the war to as much as $30 a barrel at the time of the report. The increase underscores pressure on the economics of shipping crude from the region, even as Saudi and Iraqi output returned to pre-war levels. In this context, Aramco cut its official selling price for December-loading Arab Light to Asia by $2 a barrel compared with November. The price was set at $6.50 a barrel below the Oman/Dubai average, the widest discount since May 2020, according to Reuters via ZAWYA. The decision applies to Arab Light crude supplied to Asian customers and does not describe prices for all producers in the region.
Inventory indicators suggest that improved flows do not erase the effects of the earlier disruption. Sultan Al Jaber, ADNOC's chief executive, said the Middle East crisis had drawn down nearly 1 billion barrels of crude inventories by the ADIPEC 2026 conference. Aramco Chief Executive Amin Nasser said replenishing inventories while meeting demand could take up to two years. The remarks put inventory recovery on a longer timeline than the return of some production and flows, while consumption continues to be met. The gap between improved current supply and the volume of depleted inventories remains a factor in the market's assessment of the risk of another disruption.
Operational risks remained despite signs of de-escalation: Reuters reported that 37 vessels were attacked in October, the highest monthly total since the war began in February. On prices, the EIA said spot Brent fell below $100 a barrel on November 4, after flows from the region added to supply in late October and early November. Brent also fell below $95 on Wednesday after the midterm elections, hitting a two-month low, according to the Associated Press. The agency reported on November 5 that Brent was trading at $96, down about $15 over the week, but still more than $30 above its level in the same period a year earlier. Price movements on November 11 show that markets continued to react to changing supply estimates and shipping risks.
In its outlook issued on November 10, the EIA said it expected spot Brent to remain near $100 a barrel in November and December, with oil flows from the Middle East remaining relatively constrained through the end of 2026. It also expected most production in the region outside Iran to return to pre-conflict averages by the middle of next year. On that basis, it projected Brent to decline gradually to an average of $77 a barrel in the fourth quarter of 2027 as inventories recover. Nasser said replenishing inventories while meeting demand could take up to two years. The price outlook remains tied to developments in flows, shipping risks and the pace of inventory recovery.