Oil Prices Stay Near $100 Despite Rising Middle East Supply

Crude oil costs close to $100 a barrel because traders are worried hostilities could soon restart and the world is burning through its emergency stockpiles.

· Middle East oil flows have recovered: More crude is now leaving the Middle East than at any point since the Iran war began. However, oil prices remain unusually high because traders are increasingly concerned that the conflict could resume after hopes for a durable peace deal have faded.

· Brent remains near $100/barrel: Brent crude was around $98 per barrel, reflecting the market’s valuation for oil delivered in December. This is higher than average futures prices during June–August, when Persian Gulf exports were substantially lower.

· Immediate physical crude is much more expensive: Buyers seeking prompt delivery were paying nearly $121/barrel, according to Argus. This is comparable to April levels despite the current recovery in Middle East flows.

· Oil-market vulnerability has increased: Higher physical supply does not necessarily mean the market is comfortable. As Jason Gabelman of TD Cowen noted, the industry is now in a more vulnerable position because inventories have been heavily depleted.

· Global oil inventories have been drawn down: Governments and companies have used stockpiles over the past seven months to bridge the supply-demand gap and limit price increases. This has reduced the amount of oil available to respond to another disruption.

· U.S. Strategic Petroleum Reserve sharply reduced: The United States has withdrawn more than 130 million barrels from its Strategic Petroleum Reserve since the war began, bringing government-held inventories to their lowest level since 1982.

· China has returned to the market: Chinese oil purchases, which initially fell after the outbreak of war, have been increasing. About 30% more oil was loaded onto tankers bound for China in September than in May, according to S&P Global Energy.

· China is competing for non-sanctioned crude: China is buying less oil from Russia and Iran, whose crude generally trades at discounts because of U.S. sanctions. Goldman Sachs said this has increased competition for oil from other suppliers.

· Shipping costs have exploded: Transporting crude from the Persian Gulf to East Asia costs around $34/barrel, compared with an average of only $3/barrel in January—an increase of more than tenfold. These costs are paid in addition to the crude price.

· Tanker rates are affecting the wider market: Elevated shipping costs for Middle Eastern crude have also pushed tanker rates higher in other regions, adding to the delivered cost of oil.

· Gasoline and diesel face additional pressure: Higher crude and transportation costs are feeding into refined-fuel prices, particularly diesel.

· U.S. diesel prices have surged: On Wednesday, U.S. diesel averaged $6.41/gallon, more than 70% above its level when the war began on 28 February. Crude prices, by comparison, had risen about 35%.

· Political pressure in the United States: High diesel prices have become a policy issue for President Trump ahead of the November elections. He has discussed the possibility of restricting or banning diesel exports, while several states have introduced measures aimed at reducing diesel costs, particularly for agriculture.

[ABS News Service/01.10.2026]

More oil is flowing from the Middle East than at any point since the start of the war with Iran, yet crude still costs almost $100 a barrel, much more than at other times when supplies were more constrained.

That seeming conundrum can partly be explained by a change in traders’ views about how long the conflict is going to last. Optimism that an enduring peace deal might be around the corner has given way to concern that hostilities could restart.

In the meantime, the United States and other countries have been drawing down their oil stockpiles to bridge the gap between supply and demand. That is effectively keeping prices high because the world’s buffers against future oil disruptions have become a lot smaller.

Another important factor is that China, which slashed imports soon after the war started, is now buying more oil.

“You have this apparent contradiction,” said David Fyfe, chief economist for Argus Media, a commodities pricing firm. “Flows seem to have picked up. But it’s because the industry has said, ‘What the hell, let’s go for it,’ while the politicians have failed to reach any sort of an agreement.”

There are many different prices for oil, depending on where it’s coming from and when it’s to be delivered. The most commonly cited international price for oil, known as Brent, was $98 a barrel on Wednesday, reflecting how valuable traders think oil will be in December. That is more than the so-called futures price was, on average, in June, July or August, when a lot less crude was flowing out of the Persian Gulf.

Those looking to secure oil as soon as possible have to pay much more, almost $121 a barrel, according to Argus, which tracks the physical market where energy companies are buying and selling oil to be loaded onto ships. That is comparable to prices in April, when much less oil was leaving the Persian Gulf. But the price does not include the cost of transporting the crude to its destination — a cost that has skyrocketed during the war.

“You are seeing more flows, but you’re in a much more vulnerable position industrywide now,” said Jason Gabelman, an energy analyst at the investment bank TD Cowen.

Depleted inventories are a big reason for that. Governments and companies the world over have been draining their oil tanks over the past seven months to keep a lid on prices. That means they will not be able to step in with as much oil should new strikes inflict more damage on energy infrastructure in the Persian Gulf or make shipping even more dangerous.

The United States has withdrawn more than 130 million barrels of oil from its strategic reserve since the war started, leaving government inventories at their lowest level since 1982.

A slight uptick in oil purchases by China has also kept prices elevated. Early in the war, the country cut back, keeping global prices from rising even higher. But China has been slowly returning to the market. Roughly 30 percent more oil was loaded onto tankers destined for China in September than in May, according to S&P Global Energy, a research firm.

China is also buying less from Russia and Iran, whose oil is generally cheaper because the countries are subject to U.S. sanctions, according to Goldman Sachs. That has created more competition for oil from other sources, the investment bank said.

Those getting crude from the Persian Gulf are facing significant extra expenses. The cost of moving oil by sea from the Gulf to East Asia is around $34 per barrel, a record high and up from an average of $3 in January, according Argus. Importers pay transport fees on top of the oil price. The high rates for transporting Middle Eastern oil have also driven up tanker rates elsewhere.

More expensive shipping is contributing to the high cost of gasoline and diesel, which has become a political headache for President Trump before the elections in November — so much so that he has mused about banning diesel exports. Several state governments have made policy changes in an effort to reduce the cost of some diesel fuel, particularly for use in agriculture.

On Wednesday, diesel cost an average of $6.41 a gallon in the United States, up more than 70 percent since the war started on Feb. 28. Oil prices, by contrast, had risen around 35 percent.