The balance between bullish and bearish factors has kept Brent crude locked in a trading range. A decisive breakout is likely to require a major catalyst—either an escalation of geopolitical tensions or a breakthrough in US-Iran negotiations. Let’s examine the key drivers and develop a trading plan.
The article covers the following subjects:
Major Takeaways
- The rise in Asian imports suggests that alternative routes are being used.
- Saudi Arabia’s oil exports may recover.
- WTI is being bought on expectations of rising demand.
- Brent is currently trading in the range of $80–93 per barrel.
Weekly Fundamental Forecast for Oil
Among the many possible explanations, the simplest is often the most convincing. Why isn’t Brent rallying despite the declining likelihood of the Strait of Hormuz reopening, falling Saudi oil exports, and Asian imports climbing to their highest level since the outbreak of the Middle East conflict? Combined with the renewed decline in global crude inventories, these factors would normally justify Brent trading at $100 per barrel or higher. Yet prices remain well below that level. So, what is holding the market back?
The Yemeni Houthis’ blockade of the Bab el-Mandeb Strait reduced Saudi oil exports to 4.19 million bpd in July, down 460,000 bpd from the previous month. However, crude loadings at the key export terminal in Yanbu rebounded sharply in early August.
Saudi Arabia’s Oil Exports
Source: Bloomberg.
Global crude inventories are indeed declining, but at a slower pace than previously expected. At the same time, China’s substantial strategic reserves give it the flexibility to curb imports if necessary, helping to limit further price gains.
Asian crude imports rose to 22.82 million bpd in July—the highest level since the outbreak of the Middle East conflict. While shipments through the Strait of Hormuz remain below pre-war levels, imports have rebounded sharply from April’s low of 18.77 million bpd. This suggests that alternative supply routes have been established to meet rising demand, a bearish factor for Brent. Meanwhile, the largest increase in speculative net long positions in WTI futures in four months points to growing confidence in US supply. Rising production in the United States, Brazil, and several other producers is helping offset disruptions in the Middle East.
Speculative Positions on WTI
Source: Bloomberg.
Brent bears still have plenty of arguments on their side. The oil market has also become accustomed to the cycle of escalating and easing geopolitical tensions. Fear gives way to the TACO trade and greed, then returns again, and this pattern can continue for months. As a result, investors are increasingly treating each new headline as temporary noise rather than a lasting shift in fundamentals. Until a decisive catalyst emerges, Brent is likely to remain close to its pre-war trading range rather than establish a sustained move well above or below it.
Long-Term Brent Contracts
Source: Bloomberg.
Brent is therefore likely to remain in a consolidation phase. Goldman Sachs expects prices to trade within an $80–90 per barrel range. A sustained breakout is likely only if US military operations against Iran intensify or Washington and Tehran reach a comprehensive agreement. That assessment seems reasonable. Without a meaningful escalation or de-escalation of the conflict, a return to a sustained trending market is unlikely.
Weekly Trading Plan for Brent
The ongoing tug-of-war between bulls and bears favors a range-trading strategy. Consider buying Brent on pullbacks toward the lower boundary of the $80–93 range and selling on rallies toward the upper boundary.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
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