Brent Breaks $100 as Hormuz Disruptions Deepen and Diesel Cracks Hit Records

Global oil production fell by 1.6 million barrels a day month on month to 100.1 million barrels a day in August, as more than 10 million barrels a day of Gulf output remained shut in amid heightened security risks, according to the IEA's September Oil Market Report. Total oil exports from Gulf countries in August are estimated at around 13 million barrels a day, nearly half their pre-war level. Crude losses have narrowed to just below 45% as more barrels move through pipelines that bypass the Strait and under naval escort, but refined product and LPG exports remain nearly 60%, or 3.7 million barrels a day, below February. Net exports of diesel and gasoil from Gulf producers averaged just 390,000 barrels a day in August, a little over a quarter of pre-war volumes.

The stock picture is deteriorating fast. Global observed oil inventories plunged by a further 95 million barrels in August, taking cumulative draws since February to 507 million barrels, or an average of 2.8 million barrels a day, with oil on water down 65 million barrels as tanker traffic out of the Middle East came under renewed attack. Non-OECD stocks drew by 52 million barrels led by China, while OECD stocks rose 23 million barrels as commercial builds more than offset a 19 million barrel government draw. Benchmark North Sea Dated averaged $91.00 a barrel in August, up $7.61 on the month, before surging to $113.48 a barrel on 9 September. ICE Brent traded around $105 a barrel at the time of the IEA report, up $21 since the start of August and roughly 45% above pre-war levels, with backwardation at extreme levels.

Tightness is most acute in products rather than crude. Refinery throughputs reached a summer peak of 81.4 million barrels a day in August, 960,000 barrels a day higher on the month but still 4.2 million barrels a day below a year earlier, with losses spread across the Middle East, Russia and Asian crude-importing economies. Global runs are forecast to fall by 2.6 million barrels a day to 81.5 million in 2026. Diesel and gasoil, nearly 30% of global demand, saw US prices pass the $200 a barrel mark in early September, about 94% above pre-war levels, with Europe and Asia not far behind. That has pushed refining margins to record levels in the Atlantic Basin, while surging freight rates have weighed on Singapore profitability, and damage to Russia's refining system has compounded the losses.

Supply policy has offered little relief. On 6 September seven OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman — agreed to hold October output at September levels, pausing the monthly increases they had delivered for six straight months, with the next meeting set for 4 October. The US Energy Information Administration's September Short-Term Energy Outlook sees Brent averaging around $90 a barrel in the second half of 2026 and $74 in 2027 as Middle East output recovers, but notes that global inventories have already fallen by about 400 million barrels this year and are expected to keep drawing through year-end. EIA also expects US distillate inventories to drop below 100 million barrels in September and remain under the five-year low through much of 2027, while WTI moved above $100 for the first time since May.