Crude Oil at crossroads as supply recovery meets geopolitical risk in Oct

September has delivered one of the most volatile months for crude oil since the conflict began, and the final week has distilled the entire month's pattern into a few sessions.

 

The front-month Brent contract is on track for a gain of roughly 14 per cent in September, touching a monthly high of $109.97 before retreating toward $103, while WTI has gained approximately 5 per cent. The headline close, however, masks a mechanical reset as the November contract expires on Wednesday, and the December contract, which becomes the primary market reference from Thursday, is trading near $96, meaning the apparent price level resets sharply lower at the roll without any change in the underlying fundamental picture.

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The physical picture has improved materially. Saudi Arabia's East-West pipeline, offline for nearly two weeks following drone strikes, has been restored to approximately 3.5 million barrels per day, roughly half its capacity, with Kpler data showing 12.5 million barrels loaded onto nine tankers at Yanbu.

 

Middle East crude exports have rebounded to 16.3 million barrels per day in September, the highest since the conflict began in late February, driven primarily by increased shipments and supply rerouting from Saudi Arabia and the UAE.

 

Hormuz flows averaged 13.2 million barrels per day over the seven days to September 26, still below pre-conflict levels but a significant improvement from earlier in the month, with crude exports from regional producers via the waterway and bypass routes recovering to approximately 80 per cent of pre-war levels. The EFP stands at $16.65 and Brent's 1-to-12 month backwardation has narrowed to $20.7, both easing from their mid-month peaks but remaining historically elevated, signalling the physical market continues to price residual tightness despite the supply recovery.

 

The diplomatic track has been the primary driver of intraweek volatility, and the pattern has been consistent. Optimism compresses the risk premium and a reversal expands it. Trump's rejection of Iran's seven-day Hormuz proposal, with reports suggesting he expects strikes to resume after November's midterm elections, sent Brent surging toward $109.

 

Iran's foreign minister subsequently proposed reopening the strait and resuming nuclear talks within seven days if Washington lifts the naval blockade, unfreezes Iranian assets and ends the war on all fronts, conditions Tehran has held consistently and Washington has not accepted.

 

Trump has since denied any willingness to ease sanctions on Iran, while Qatar continues to push for progress through back-channel communications. The November midterm timeline cited by multiple sources on the US side is the structural constraint that limits how far the diplomatic calendar can advance regardless of the language used in any given session.

 

The inventory and policy picture adds further texture. The US has announced a final release of up to 40 million barrels from the Strategic Petroleum Reserve, its last contribution to a coordinated drawdown of 172 million barrels since the conflict began, providing a degree of near-term supply relief even as the SPR sits at its lowest level since 1982.

 

The potential US diesel export restriction remains unresolved, with the administration leaning toward voluntary restraint with refiners rather than an outright ban, contributing to the Brent-WTI spread widening above $12, its widest since May.

 

The broader point is that improving crude flows through Hormuz does not automatically resolve the refined products problem. Diesel scarcity in particular has become a supply constraint that sits independently of crude flow normalisation, and product markets continue to price a tightness that crude futures have begun to discount.

 

The market has not yet settled on a direction, leaving an unusually wide range of possible outcomes for October. On the supply side, continued restoration of Saudi Arabia’s East–West pipeline and firmer flows through the Strait of Hormuz would slowly reduce the geopolitical risk premium.

 

The December Brent contract, now the front month, is trading near $96 and sets the immediate reference price, and if supply normalization continues without new disruptions, this path could pull Brent toward the $93–$94 zone.

 

Diplomatic developments, however, are likely to move prices more than incremental supply improvements. A credible US–Iran negotiating framework, even an early-stage one, would probably trigger a sharp drop below $90 as the geopolitical premium unwinds faster than physical barrels can justify.

 

Conversely, any Iranian escalation targeting Gulf energy infrastructure would erase that downside scenario and push prices back above $100. For now, the market is caught between these two possibilities. Supply is recovering, but the geopolitical risk premium remains high. As October begins, the next major move in crude will likely depend less on the latest inventory number and more on the next clear signal from the US-Iran diplomatic track.

 

MCX Crude Oil is showing a cautious-to-bearish setup on the 4-hour chart after facing resistance near ₹9,280–9,300 and slipping below its short-term moving average. The immediate support is placed around ₹8,580–8,600, while a decisive break below ₹8,580 could open the downside towards ₹8,270 and ₹7,850.

 

On the upside, ₹8,940 remains the first hurdle, followed by ₹9,280; sustained trade above ₹9,280 could improve the outlook and push prices towards ₹9,650. The RSI at around 39 indicates weakening momentum but is not yet in oversold territory, suggesting that selling pressure remains present while a recovery would require a move back above ₹8,940.