Brent: Geopolitics keep rally supported – ING

ING analysts Warren Patterson and Ewa Manthey report that Brent crude has surpassed $100 per barrel for the first time since July, driven by persistent geopolitical tensions in the Persian Gulf and limited prospects for de-escalation between the US and Iran. The analysts caution that Chinese crude buying behaviour will be key to the sustainability of the current oil rally.

Brent pushed through $100 per barrel yesterday for the first time since July, and this momentum has carried into early‑morning trading today. The market remains focused on geopolitical risk, as tensions in the Persian Gulf show no credible path to de‑escalation and, in fact, current signals suggest further escalation. Iran has stated its readiness to intensify the conflict, while US President Trump indicated the war is likely to continue until after the midterm elections in early November.

The risk of escalation leading to significant disruptions to Strait of Hormuz flows looms large, as oil flows have surprised to the upside in recent weeks but could tighten sharply if ongoing escalation disrupts oil flows once again. The bullish sentiment is also bolstered by China's increased activity in the physical market, particularly in the North Sea, where Dated Brent has seen more strength.

Although China has helped rebalance the market through lower crude oil imports throughout the war, imports have started to recover from June lows, with recent physical-market activity indicating this trend could continue. The outlook hinges on Chinese buying behaviour, which will largely determine whether this rally sustains its momentum.

Overnight API data shows US crude oil inventories fell 300,000 barrels over the last week, with gasoline stocks dropping by 1.9 million barrels and distillate inventories rising by 2 million barrels. The more widely watched EIA inventory report will be released later today. The upcoming EIA inventory report will provide additional insight into the market's direction.