| Commoditiy | Price | Weekly Change | 50day-Ave | 100day-Ave | 200day-Ave |
|---|---|---|---|---|---|
| Brent ($/b) | 107.20 | 0.55 | 99.07 | 91.44 | 90.69 |
| US WTI ($/b) | 99.58 | 5.84 | 91.41 | 85.94 | 84.67 |
| ICE Gasoil ($/MT) | 1,412.75 | -70.25 | 1,400.04 | 1,236.17 | 1,131.41 |
| Jet CIF NWE ($/MT) | 1,503.82 | -25.72 | 1,437.85 | 1,277.09 | 1,223.66 |
More than a week has now passed since President Trump’s latest attempts to bring diesel prices lower, but there has been little discernible impact on the market. The decision to waive sanctions to allow Russian diesel imports was always likely to provide only modest additional supply, assuming the barrels could be delivered at all. The subsequent announcement of an energy ceasefire between Russia and Ukraine initially pushed prices lower, but the move quickly reversed when doubts emerged over whether either side had actually agreed to the arrangement. As a result, diesel prices remain extremely elevated. New York diesel futures continue to trade around 200 \$/b, while European prices are somewhat lower but remain historically high.
Crude prices, meanwhile, have moved higher. Brent briefly touched 110 \$/b on Friday and, by a narrow margin, reached its highest level since May. The latest move has been driven by another deterioration in the security situation in the Middle East, with Iranian attacks on shipping through the Strait of Hormuz increasing in recent days. These have reportedly included numerous attacks on oil tankers and culminated in the sinking of a container ship. At the same time, the conflict in Yemen remains intense, with further strikes against Saudi Arabia. Egypt’s President Sisi has called for an emergency parliamentary session that would allow him to approve any Saudi request for defence assistance, highlighting the growing risk that the conflict could draw other countries in the region into the fighting.
The latest International Energy Agency outlook provides a contrasting view of the longer term oil market. Compared with its September report, the IEA has cut its forecast for global oil demand in 2027 by 600,000 barrels per day, from 105.0 mb/d to 104.4 mb/d, compared with its forecast of 102.4 mb/d for this year. Much of the downgrade is concentrated in the second half of 2027, reflecting the IEA’s expectation that the conflict and its economic consequences will persist for longer and prevent demand from recovering as quickly as previously expected. The weaker demand outlook has also led the IEA to reduce the amount of OPEC production it believes will be required to balance the market, with the new estimate broadly in line with current OPEC output. This suggests there is little immediate need for OPEC to bring additional crude back to the market.
This creates a potentially important downside risk for crude prices if conditions in the Middle East eventually normalise. OPEC members were producing around 6 mb/d more before the war than they were in September, meaning substantial volumes of crude could potentially return if the Strait of Hormuz fully reopens and regional exports recover. Against the IEA’s weaker demand outlook, this could quickly create an oversupplied market and put significant downward pressure on crude prices, although lower prices would themselves help stimulate demand and provide some support. For the moment, however, the immediate risk remains in the opposite direction, with escalating attacks on shipping and the possibility of a broader regional conflict continuing to support Brent at elevated levels.
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