Brent Crude Holds Firm as Geopolitical Risks Support Oil

Key Moments

ICE Brent prices stay supported around $110/bbl as markets concentrate on Middle East supply risks and associated risk premium.
Record tanker freight rates and less efficient vessel deployment, linked to Middle East developments, underpin elevated delivered oil costs.
China’s September crude data point to inventory drawdowns of a little more than 500k b/d and weaker apparent demand at 12.75m b/d.

Risk Premium Anchors Brent and Oil Prices

ING strategists Warren Patterson and Ewa Manthey observe that Oil and ICE Brent benchmarks are continuing to trade on solid footing around $110/bbl, with the market’s attention firmly on supply vulnerabilities in the Middle East. They emphasize that ongoing geopolitical uncertainty is keeping a pronounced risk premium embedded in prices, despite relatively robust crude flows from the Persian Gulf.

According to their assessment, the current pricing structure reflects the market’s anticipation of potential disruptions rather than actual realized supply losses. They note that if crude shipments from the region keep moving without interruption despite the tense backdrop, the embedded risk premium is likely to diminish gradually over time.

Freight Market Tightness and Tanker Dynamics

The strategists underline the impact of shipping conditions on the overall cost of crude, pointing specifically to exceptionally high tanker freight rates. They attribute these record levels in part to reduced efficiency in how tankers are deployed, which they associate with recent developments in the Middle East.

They also highlight a possible policy response: “Namely, the record tanker freight rates we are seeing, given the less efficient use of tankers due to developments in the Middle East. The US is considering steps to allow the sale of sanctioned tankers, which would increase tanker capacity in the legitimate market. The idea is to bring freight rates down and reduce the delivered cost of oil to destination.”

However, they caution that the impact of such measures is uncertain: “However, uncertainty remains about how much capacity this could add to the legitimate market. The process’s duration means it may not offer immediate relief.”

China’s Crude Balance: Production, Runs, and Inventories

China’s latest crude oil statistics, as highlighted by Patterson and Manthey, shed further light on the global supply-demand balance and inventory trends. They note that “China released output data yesterday showing that domestic crude oil production rose 0.6% month-on-month and 2.5% year-on-year to 4.45m b/d in September. Meanwhile, refineries processed a little over 14m b/d of crude over the month, up 0.4% MoM but still down 8.4% YoY. This is the largest amount of crude processed by Chinese refiners since March.”

Combining these figures with previously reported trade data, the strategists conclude that China has been drawing down stockpiles: “Along with previously released trade data, this suggests that China drew down crude oil inventories at a pace of a little more than 500k b/d, or 16m barrels through September. The numbers also suggest that apparent demand fell by 2.7% MoM and 15.2% YoY to 12.75m b/d in September.”

Key China Crude Metrics for September

Indicator	September Level	MoM Change	YoY Change
Domestic crude oil production	4.45m b/d	+0.6%	+2.5%
Refinery crude throughput	A little over 14m b/d	+0.4%	-8.4%
Apparent demand	12.75m b/d	-2.7%	-15.2%
Inventory drawdown	A little more than 500k b/d (16m barrels)	Through September

Implications for the Oil Market Outlook

Patterson and Manthey’s analysis portrays a market that remains tight and highly sensitive to geopolitical headlines. Strong risk premia linked to Middle East tensions, elevated tanker costs, and China’s combination of inventory draws and softer apparent demand all contribute to an environment where Oil and ICE Brent prices stay well supported, with future price dynamics hinging on both supply continuity and shipping developments.