Oil pushes toward $98 as Hormuz risks and China demand bolster bullish hedge fund bets

Oil prices edged closer to the $100 mark on Monday, buoyed by threats to shipping through the Hormuz Strait and increased Chinese crude purchases, according to a Bloomberg report. Brent crude surged past $98 a barrel before retreating slightly during a subdued trading session, with US markets observing a Labor Day holiday. The recent rise is driven by ongoing Middle East tensions and supply concerns, as Iran and Oman reportedly negotiated a deal to manage shipping through Hormuz, despite tensions with the US.

The potential for attacks on vessels in Omani waters heightens risks, while Saudi Aramco facilities in Jazan were recently targeted. Supply fears are further fueled by a resurgence in Chinese demand, with Beijing re-engaging in the crude market after a period of muted buying, lifting prices for shipments from regions like West Africa and Canada.

This move is crucial as China's demand rebound coincides with declining inventories, providing a more supportive market outlook. Brent crude is nearing $100 for the third time this year, having climbed approximately 60% in 2026. Refined products, such as diesel, have surged even higher due to ongoing conflict risks and additional supply constraints from the Russia-Ukraine war.

The convergence of geopolitical uncertainties, dwindling inventories, and burgeoning Chinese demand is set to dominate discussions at the Asia-Pacific Petroleum Conference in Singapore. Hedge funds have been tightening their bullish bets on oil, with net-bullish positions in Brent reaching the highest level since May and net-long stances in US crude approaching their strongest since June.

These positions indicate traders are growing increasingly confident that the conflict could trigger a more enduring supply squeeze. Goldman Sachs analysts have cautioned that Brent could surge to $120 a barrel in a more severe situation, especially if attacks on commercial shipping intensify.