Crude Oil Near €90–€95: War Risk Collides With Demand Slowdown
Crude oil trades near €90–€95 as Middle East risks tighten supply while demand slows. Analysis of OPEC+ policy, demand risks and Australia’s SAF potential.
Prices
Brent futures briefly traded above USD 100/bbl this week on heightened Middle East fighting and renewed concerns about disruptions to flows through key shipping chokepoints, with intraday highs near USD 102/bbl reported on July 23. This equates to roughly EUR 93–95/bbl at prevailing FX rates. As of early July 24 trading, Brent has eased slightly to just under USD 100/bbl but remains around 13–14% higher on the week, reflecting a strong risk premium.
WTI is trading in the high USD 80s to low 90s (around EUR 80–85/bbl), after rallying from the low USD 80s earlier in the month. Price action is currently dominated by headline risk around the Middle East conflict and shipping conditions, offsetting lingering bearish sentiment from earlier in July when expectations of an oversupplied market prevailed following successive OPEC+ output increases.
Supply & Demand
On the supply side, OPEC+ has approved another increase in production targets, adding about 188,000 bpd from August on top of earlier rollbacks of voluntary cuts, as exports via the Strait of Hormuz gradually recover. This comes after several months of stepwise output hikes and follows the UAE’s exit from OPEC in May, which modestly reshaped group dynamics. Incremental supply from both OPEC+ and non‑OPEC producers is aimed at normalising inventories and stabilising prices, but it also caps the upside once acute disruption fears fade.
On the demand side, the balance has turned noticeably softer. The IEA’s July Oil Market Report points to a deteriorating macro backdrop and a rare contraction in global oil demand in 2026, while some banks now see 2026 demand falling by around 1.5 mb/d, with year‑on‑year declines potentially reaching 4 mb/d in Q2 based on preliminary data. Slower industrial activity, efficiency gains, and fuel switching in transport and petrochemicals are all weighing on consumption expectations.
Beyond the immediate horizon, structural substitution in aviation fuels is coming into clearer focus. New analysis for Australia’s Jet Zero Council suggests that existing domestic feedstocks – notably canola, used cooking oil and other waste streams – could yield sustainable aviation fuel equivalent to 117% of Australia’s projected jet fuel demand by 2030, without compromising food supply. Significant volumes of canola currently exported (around 80% of output) could instead be refined domestically into roughly 1.6 billion litres of SAF per year, creating a scalable alternative to fossil jet fuel. Over time, similar feedstock‑driven SAF build‑outs globally would gradually erode crude‑derived kerosene demand.
Fundamentals & Energy Transition Signals
Current physical fundamentals are caught between near‑term logistical risk and medium‑term loosening. Inventory data remain mixed, but the sharp price rebound indicates that markets are paying a premium for prompt barrels amid fears of further disruption in Middle Eastern supply routes. At the same time, the gradual reopening of Hormuz exports and additional OPEC+ barrels argue against a sustained structural shortage if current hostilities do not escalate further.
On the structural side, Australia’s SAF potential is illustrative of a broader decarbonisation trajectory. The GrainCorp‑backed work emphasises that feedstock availability is not the key bottleneck: Australia alone could support a sizeable SAF industry using existing agricultural and waste resources, with canola oil as the most scalable component due to mature farming, storage and export infrastructure. Redirecting a portion of these raw materials from export markets into domestic refining would not only deepen local value chains but also enhance national energy security in a country that currently imports about 90% of its liquid fuel needs.
If replicated elsewhere, such feedstock‑based SAF capacity could structurally cap growth in fossil jet fuel demand, particularly in OECD markets with strong climate policy frameworks. While the absolute volumes remain modest versus today’s 100+ mb/d crude market, the marginal impact on long‑haul aviation – one of the more price‑sensitive demand segments – could become more visible in the 2030s, contributing to flatter demand curves and lower long‑term equilibrium prices than in past cycles.
Short‑Term Outlook & Trading Takeaways
In the next few weeks, price direction will hinge on whether Middle East tensions further disrupt exports or gradually de‑escalate. In the bullish case, extended disruptions at key chokepoints could keep Brent sustainably above EUR 90/bbl and even test higher levels toward the mid‑EUR 90s. Conversely, if shipping flows continue to normalise and additional OPEC+ barrels reach the market against a weakening macro backdrop, the current risk premium could unwind quickly, dragging Brent back toward the low‑EUR 80s.
For aviation‑linked refined products, the near‑term link to crude remains tight, but the Australian SAF developments highlight an emerging alternative. While SAF output is not yet large enough to materially affect crude balances, forward‑looking hedgers in aviation and logistics should increasingly factor in policy‑driven SAF mandates that may decouple a portion of jet fuel procurement from crude benchmarks over the coming decade.
Trading Outlook (next 1–4 weeks)
- Producers / hedgers: Consider incrementally increasing hedge cover on rallies above EUR 90/bbl Brent, locking in favourable prices before additional OPEC+ supply and weaker demand expectations potentially weigh on the curve.
- Consumers (industrial, transport, aviation): Maintain at least partial coverage for Q3 on current strength but keep flexibility for opportunistic top‑ups if geopolitical risk premia fade and prices retrace toward the low‑EUR 80s.
- Speculative participants: Risk/reward for fresh longs looks less compelling above EUR 90/bbl; focus on event‑driven trades around key Middle East headlines and OPEC+/IEA updates, with tight risk management given two‑way volatility.