12.10.202609:07 Forex Analysis & Reviews: Exports from the Persian Gulf Reached 98% of Prewar Levels, but Oil Is in No Hurry to Fall

Oil eased today after a volatile start to the week. Brent slipped to $103 per barrel after giving back its morning gains, while WTI trades below $91. Early in the session, Brent rose to $105.63, whereas on Friday in the Asian session the barrel was $102.94 and WTI $90.37.

All this suggests traders are weighing steady flows from the Middle East against rising regional tensions and US statements about an "energy truce" between Russia and Ukraine. Buyers of petroleum products, pressured by record diesel, are winning; those who bet on a quick jump above $105 are losing.

On Sunday, Saudi Arabia's main airport was attacked again, and another tanker was fired upon in the Strait of Hormuz. This continues the escalation against vessels in the region, but so far it has hardly affected flows. JPMorgan Chase estimates oil exports from the Persian Gulf have recovered to 17.5 million barrels per day, i.e., 98% of the prewar level. For comparison, Vitol's head cited about 12 million barrels, the US military command 20 million, and Trump 22 million, so the bank's estimate was closer to the military version than to the traders'.

That is why the market took the strikes calmly. The attacks aren't hitting energy infrastructure directly, which explains why oil failed to hold the morning rally—production and exports haven't suffered direct damage, while the risks carry a different price. The strike on Riyadh's airport occurred a day after an attack on the same facility that killed 12 people.

Recall that the Houthis opened a new front in July, beginning strikes on Saudi energy infrastructure and tankers in the Red Sea, while Riyadh-backed forces launched a campaign to retake areas and eliminate the group. Last week government forces captured Mocha near the Bab el-Mandeb Strait. For this reason, each escalation in Yemen adds a premium to prices even when physical supplies are not impaired, showing up as sharp price spikes.

The second source of volatility is related to Russian diesel. Donald Trump said an "energy truce" between Russia and Ukraine took effect immediately, although he declared a similar truce last month. Last week, Trump also spoke about Russian diesel supplies to the US market, drawing bipartisan criticism in Washington.

In my view, Brent will remain between $100 and $106 in the coming sessions, with risks on both sides. A rise above $105 will return on any new attacks on tankers in the Hormuz or on Saudi infrastructure, while a drop below $100 is unlikely as long as Gulf exports hold at 98% of prewar levels and product stocks remain depleted.

As for the current technical picture, buyers need to take out the nearest resistance at $92. That would set up a target at $96, above which a breakout will be difficult. The most distant target is the $100 area. If oil falls, bears will try to seize control of $89. If they succeed, a breakout of the range would seriously hurt bull positions and push oil down to a low of $87, with the prospect of extending to $83.