Brent nears $100 a barrel: What’s stopping oil from crossing the line?

Brent crude is now just a heartbeat away from the $100-a-barrel mark. The global benchmark has continued to inch higher towards the psychologically important mark but is yet to breach it, even as escalating tensions in the Middle East fuel concerns over disruptions to global energy supplies.On Wednesday, WTI crude was trading at $94.53 a barrel, up $1.50 or 1.61%, while Brent was at $99.59, higher by $1.67 or 1.71%. The spike came after the latest exchange of strikes pushed the conflict into another phase of escalation. Iran launched missiles towards US targets in Jordan after the US military destroyed five Iranian oil tankers on Tuesday in response to attacks on its warships.Middle East producers are now shipping around 11 million barrels per day (bpd), down from 18 million bpd before the Iran war began seven months ago, according to Argus. The latest escalation has hit exports through both the Strait of Hormuz and the Red Sea, putting further pressure on regional oil flows.Yet the disruption has failed to push benchmark crude prices decisively past $100. Alternative export routes, additional production from other countries and weaker demand have helped absorb part of the supply shock.Oil continues to flowAlternative export routes, higher output from other producers and a sharp drop in demand have so far absorbed much of the disruption, keeping prices from making the final leap past $100.Substantial volumes have continued to move through Hormuz. Rystad Energy chief economist Claudio Galimberti said 8 million to 9 million bpd passed through the strait in the week before fighting erupted again on August 30, about twice the previous week's level. Although flows have subsequently dropped below 2 million bpd, the daily moving average remains around 4 million to 5 million barrels. That puts Brent at a "fair" price of $95, Galimberti told Reuters. Industry estimates put daily exports through the strait at 6 million to 8 million barrels.Kpler data showed on Monday that no very large crude carrier had visibly exited Hormuz since September 2. During the interim US-Iran peace deal in July, exports through the strait had returned to pre-war levels of 16 million bpd.Gulf producers find alternative routesGulf oil producers have been finding ways to move barrels without relying entirely on Hormuz, using alternative routes and ship-to-ship transfers outside the strait to limit some of the earlier supply shortfall.Saudi Aramco restarted loadings from its Ras Tanura port inside the Gulf in August. Its Yanbu exports through the Red Sea have been weaker because of a naval blockade by the Iran-aligned Yemeni Houthis. Yanbu shipments fell to a six-month low of 1.429 million bpd in August, against an average of 3.9 million bpd over the previous three months, provisional Kpler data showed.Other routes have taken on more importance. Exports from Egypt's Sidi Kerir reached 2.139 million bpd in August, more than twice June's level. Iraq's exports recovered to around 2.34 million bpd in August, while UAE shipments were around 2.9 million bpd in both July and August after reaching a record in June. Kuwait's crude exports also recovered to about 1 million bpd in July and August. Iran, in contrast, has seen oil exports fall sharply because of the US blockade.More supply from outside regionThe US, Canada and Guyana are expected to increase their combined output by 1.4 million bpd this year, according to Rystad Energy founder Jarand Rystad.Russia has also continued to send significant volumes. Its crude exports stood at about 5.5 million bpd in July and August, below the 6.4 million bpd peak in June but still 23% above February levels. Kpler attributed the higher exports to lower processing at Russian refineries after Ukrainian attacks damaged Russian plants. Russia, however, has cut its forecast for 2026 oil output to a 17-year low, which could eventually weigh on exports.Weaker demand cushions supply shockWeaker consumption is also absorbing part of the disruption. Demand destruction in petrochemicals and transportation fuels remains significant at 3.5 million bpd in the third quarter, compared with 4.5 million bpd in the second quarter, Rystad said.China accounts for more than half of that reduction amid rising transport electrification and coal-based chemicals. The world's biggest importer, dubbed the "new demand OPEC" because of its influence on the market, reduced seaborne crude arrivals to 7 million bpd in July and August from more than 11 million bpd in February. Its estimated reserves of 1.17 billion barrels, according to Kpler, have also provided some comfort.Physical market signals tighter supplyThe picture is considerably tighter in physical oil markets. Spot premiums have climbed back to April levels, with Dubai and Oman trading at $19 to $20 a barrel above Dubai quotes for cargoes loading in November, according to data cited by Reuters. Oman futures stood at $104.54 a barrel on Monday, while cash Dubai traded at $105.10."At the moment, it's telling us that physically things are incredibly tight," said David Fyfe, chief economist at Argus."We've already got prices substantially above $100 a barrel and even more important, you've got a diesel market that is screaming shortage."The latest escalation between the US and Iran is expected to put further pressure on Gulf exports as refiners increase diesel output. Diesel has hit a record high price in the US. The tightening physical market has prompted analysts to raise their oil price expectations. Morgan Stanley now sees Brent averaging $100 a barrel in the fourth quarter.Goldman Sachs has raised its Brent and West Texas Intermediate forecasts by $5 a barrel for December 2026 and 2027, citing expectations that disruptions to Middle East shipping will continue into next year. It now expects Brent to reach $85 a barrel and WTI $80 in December 2026. For 2027, its forecasts stand at $80 for Brent and $75 for WTI.Get the latest Business News and Live updates. Download the TOI app.