Today, oil rose slightly after two days of declines. Brent trades around $92 per barrel after a 7% drop in the first two sessions of the week, and WTI remains below $87. Year-to-date Brent is still up more than 50%, but the market sharply reversed in November. On October 30, it stood near a six-month high around $116.
The reversal stems from hopes of de-escalation and rising exports from the Persian Gulf. Oil continues to flow from the Middle East despite attacks on ships, and regional supplies are approaching prewar levels. Donald Trump said new strikes on Iran are unnecessary, although as recently as November 4 he spoke of readiness to act; flare-ups in the region continue while negotiations make little progress. The market, however, focuses on the key question: will the Strait of Hormuz remain reliably open? Any deal will likely be a messy compromise with many unresolved issues, but for oil the critical point is whether the strait is reopened.
The physical market still adds uncertainty. A tanker carrying Russian diesel that briefly indicated a US destination turned away off New York, raising questions about deliveries to North America. Recall that in October Trump negotiated fuel supplies with Vladimir Putin, a deal Democrats criticized. The American Petroleum Institute reported US crude stocks rose by 9 million barrels for the week, after a 5.3 million-barrel draw the prior week (API data), while official figures had shown a 0.9 million-barrel draw then. Distillate inventories, including diesel, which had fallen below 100 million barrels for the first time since 2003, rose by 1.5 million barrels.
Cheaper oil benefits importers and makes the Federal Reserve's job of fighting inflation easier, while hurting exporters; the effect will show up in November's CPI rather than October's already hot print. The US Energy Information Administration raised its 2027 price forecasts: retail gasoline averaging $3.73 per gallon and diesel $5.03, while cautioning about potential global fuel shortages. For comparison, US gasoline was about $4.12 per gallon in early November. US crude production remains forecast at about 14.3 million barrels per day.
I believe downward pressure on oil will persist while Gulf supplies rise toward prewar levels, and a test of $90 Brent is more likely than a return to $100. The market will probably only hold sustainably below $90 if a deal with Iran is struck; without such a deal, low global inventories and refined-product shortages will cap the downside. A breakdown in talks or new strikes on regional infrastructure could push prices higher. Near-term catalysts to watch include official US inventory data on Thursday, OPEC reports today, and the IEA report on November 13.
Technically, buyers need to take out the nearest resistance at $87. That would set up a target of $89, above which a breakout will be difficult. The most distant target is the $92 area. On a decline, bears will try to seize control of $84. If they succeed, a range breakout would deal a serious blow to bulls and push oil to an $81 low with the prospect of moving to $78.