WTI holds near $96 as geopolitical risks offset weaker demand outlook

Traders Union
All News
Commodities
Oil prices face conflicting market forces

Middle East tensions threaten oil supply stability

The situation in the Middle East has once again become the main factor supporting the oil market. Today, reports emerged of Houthi attacks on Saudi Aramco facilities in Dhahran, while a cargo ship reportedly sank in the Strait of Hormuz after striking a naval mine, according to Iranian authorities. These events have heightened concerns about the security of energy infrastructure and maritime transportation.

Shipments through the Strait of Hormuz remain severely restricted, despite attempts by Persian Gulf countries to redirect exports through alternative routes. Saudi Arabia and Iraq managed to increase production in September, but the new escalation raises doubts about the sustainability of this recovery. An additional factor is the rising cost of tanker freight and insurance, which increases the final cost of oil for buyers.

Inventory declines contrast with weaker global demand forecasts

Against this backdrop, Morgan Stanley raised its average Brent price forecast to $105 per barrel for the fourth quarter of 2026 and $100 for the first quarter of 2027. The latest EIA report showed a decline in U.S. commercial crude oil inventories of 3.19 million barrels to 424.1 million for the week ending October 2, contrary to expectations of an increase of approximately 1.7 million barrels. Refinery utilization reached 92.7%, while production remained around 14 million barrels per day.

Meanwhile, distillate inventories are approximately 12% below the five-year average, supporting high diesel prices ahead of winter. The next EIA report will be released tomorrow, October 15, and will help determine whether the decline in U.S. inventories continues. At the same time, the IEA forecast published today projects a decline in global oil demand of 2.6 million barrels per day in 2026 due to high fuel prices and deteriorating economic conditions.

However, the agency notes that global inventories at the end of September were 509 million barrels below pre-war levels, meaning that even a decline in consumption has not yet eliminated the supply deficit. The EIA's October forecast also projects an average Brent price of around $105 in the fourth quarter, although a gradual decline is expected during 2027 as supplies recover.

Key price levels define short-term market direction

Thus, the oil market is caught between two opposing factors: escalating tensions in the Middle East and low global inventories support prices, while deteriorating prospects for global demand limit the potential for further growth.

Against this backdrop, we are still unlikely to see sustained movements in either direction. Above $95.60–95.00, sentiment will remain positive, and bulls may once again test resistance around $96.80. A break above this level would allow WTI to continue its advance toward $97.40–98.00, while a loss of support at $95.00, as I warned in the article WTI targets $97 as Middle East tensions support oil prices, would lead to a decline toward $94.40–94.00.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.