Brent crude futures reached $117 in recent trading, coming within a whisker of the year’s all‑time high of just above $118 recorded on March 31. The price level reflects a 90 percent rise in front‑month futures and a 100 percent increase in the spot (Dated Brent) price since the start of the year.
Recent price movements
In March, Brent was pushing toward $110, an 80 percent climb from the beginning of the year. At that time, the market had risen $15 in a single week, prompting speculation that $150 could be a near‑term target. A podcast recorded on March 19 with economist Paul Krugman discussed these dynamics, noting the heightened volatility and the possibility that the surge priced in the risk of a “hot” war in the Strait of Hormuz.
Supply normalization in the Gulf
Current analysis points out that oil supply out of the Persian Gulf has “almost completely normalized.” While earlier in the year supply had dipped to a low of 8 million barrels per day (mb/d), recent data suggest output is approaching the pre‑war level of roughly 20 mb/d. The author argues that a supply drop below the earlier low is extremely unlikely, and a more plausible scenario would see output fall to around 13 mb/d. Such a reduction would justify a 50 percent price increase from the start of 2026 and a front‑month futures price near $90, rather than the $117 observed.
Risk premium versus demand
Two explanations are offered for the elevated Brent price: a surge in demand or a risk premium reflecting expectations of renewed conflict. The demand argument appears weak, given debt concerns in France and other economies. Instead, the prevailing view is that markets are embedding a sizable risk premium, which the author describes as “extreme and excessive.” Supporting this view, the December 2027 Brent future has remained flat, indicating that the price jump is confined to the short‑term contract and is not driven by long‑term fundamentals.
Demand fundamentals remain modest
Recent demand data for September show that China, Japan, South Korea, and India have returned to pre‑war consumption levels. China’s demand is about 2 mb/d below its pre‑war figure, a shortfall attributed to the Iran blockade; when adjusted, China’s demand aligns with pre‑war levels as does that of the other nations.
Outlook
The analyst concludes that a large, possibly excessive, risk premium is now priced into Brent. Should a “hot” war resume, the premium could briefly lift prices toward $125, but that is viewed as the upper bound under current conditions.
Norman Pearlstine is the Executive Editor and Co-Founder at News Raise. With over two decades of experience across financial journalism, corporate governance, and market analysis, Norman leads the editorial direction and ensures strict adherence to journalistic accuracy and ethics.
