WTI and Brent Push Above $90 as Middle East Risks Keep Backwardation Steep

WTI and Brent futures extended their rally on 9 October, with nearby contracts holding above USD 90–100 per barrel and the forward curve in pronounced backwardation out to 2027, as war-related supply risks and tight products markets outweigh only modest demand growth. Crude benchmarks remain underpinned by persistent Middle East disruptions, low strategic stocks and strong refining margins, even as OPEC+ signals no near‑term policy change and non‑OPEC supply gradually recovers. Front‑month WTI (Nov 2026) settled at USD 91.85/bbl and ICE Brent Dec 2026 at USD 104.72/bbl, both up around 0.4% on the day, while ICE gasoil eased but stayed at elevated levels, reflecting a still‑tight diesel complex. With the IEA’s next Oil Market Report due on 14 October and hurricane risks briefly affecting US Gulf refining, volatility should stay high and dips are likely to attract buying.

Prices & Forward Curve

The NYMEX WTI curve shows strong backwardation from Nov 2026 at USD 91.85/bbl down to around USD 70/bbl by late 2029 and the low‑60s by 2031–2032, with daily gains along the strip of roughly 0.1–0.5% on 9 October. The ICE Brent curve is even higher, with Dec 2026 at USD 104.72/bbl and Jan 2027 at USD 101.25/bbl before easing below USD 90/bbl by mid‑2027 and trending into the low‑60s by 2037.

This structure signals a market still paying a significant risk and prompt‑tightness premium, despite expectations for more comfortable balances in outer years, as suggested by IEA and EIA projections for only moderate demand growth and recovering supply capacity. Rising crude prices have already been noted as a headwind for broader financial markets, with recent trading sessions in equities reacting sensitively to moves in Brent above USD 100/bbl.

Supply, Demand & Geopolitics

Middle East exports have largely recovered towards pre‑war levels, with estimates placing regional crude shipments close to 17.5–18.6 mb/d in September. However, this has been achieved via costly rerouting through Saudi Arabia’s East‑West pipeline and ship‑to‑ship transfers, while attacks on infrastructure in Hormuz, Bab el‑Mandeb and along the Red Sea keep a substantial geopolitical risk premium embedded in prices.

OPEC+ recently maintained its overall production policy while key members who had added barrels back earlier in 2026 now signal a period of stability, even as a 4 October virtual review underlined elevated uncertainty from the regional conflict. At the same time, OECD strategic stocks remain depleted: US SPR inventories are near their lowest level since the early 1980s, limiting the system’s buffer against future shocks. The latest EIA outlook assumes Middle East flows stay constrained through Q4 2026, with shut‑in volumes averaging around 5.7 mb/d, reinforcing the case for a tight near‑term balance.

On the demand side, global oil use in 2026 is still projected to grow, but only modestly, in the order of several hundred thousand barrels per day according to the IEA’s September Oil Market Report. Slower OECD consumption, efficiency gains and EV penetration offset part of the rebound in emerging markets, keeping the structural call on OPEC+ barrels below earlier pre‑war expectations, though the Iran war has more than offset this softness through forced supply losses.

Products & Refining Margins

The ICE gasoil (low‑sulphur diesel) forward curve remains elevated despite a sharp 1.8% decline in the prompt October 2026 contract to USD 1,483/t. The structure shows a gradual contango from late 2027 into the early 2030s, with prices sliding from above USD 1,400/t in Q4 2026 towards the mid‑700s/t by 2031–2032. This level, relative to crude, still implies robust diesel cracks and incentivises high refinery runs where capacity and feedstock logistics allow.

The downstream system nevertheless faces persistent bottlenecks: Middle East refined product exports and LNG remain well below pre‑war norms, while European and US refining centres are periodically hit by outages and weather. The approach of Hurricane Isaias to the US Gulf, even if largely missing core hubs, underlines how vulnerable the already tight products balance is to temporary power losses or flooding at major refineries, particularly for diesel and jet.

Short-Term Outlook (Next 1–3 Months)

Near‑dated WTI and Brent are likely to remain supported above USD 90 and USD 100/bbl respectively in the very short term, given:

• Middle East flows still below full potential and at risk of fresh disruption to pipelines and shipping routes.
• Historically low strategic reserves, limiting the scope for large, prolonged stock releases to cap prices.
• Persistently tight diesel and jet markets, keeping refinery margins high and supporting crude runs.

Key event risk is the IEA Oil Market Report on 14 October, which may adjust demand and supply balances for late 2026 and 2027. Any indication of faster non‑OPEC supply growth or weaker demand could flatten the back of the curve, but is unlikely to erase the prompt risk premium while the Iran conflict and attacks around Hormuz and Bab el‑Mandeb continue. In financial markets, elevated oil prices remain a source of concern alongside high bond yields.

Trading Outlook & 3‑Day Indications

• Producers (hedgers): Current backwardation favours layering in additional hedges in 2027–2029 tenors, where WTI trades in the high‑70s to low‑80s and Brent in the high‑80s, well below spot but still attractive versus historical averages.
• Consumers (refiners, airlines): Consider extending hedge coverage modestly for Q4 2026–H1 2027 exposure while prompt prices are already elevated, focusing on options structures to retain some benefit from potential downside if geopolitical risks ease.
• Financial participants: The steep backwardation offers positive carry for length in nearby contracts funded by shorts in deferred months, but positioning should stay nimble around geopolitical headlines and the upcoming IEA and OPEC+ updates.

Over the next three trading days (12–14 October), we expect:

• WTI (NYMEX): Bias sideways‑to‑firm around the low‑90s USD/bbl as traders balance Middle East risks against profit‑taking ahead of the IEA report.
• Brent (ICE): Likely to hold above the psychological USD 100/bbl mark, with intraday spikes on any fresh disruption headlines.
• Diesel (ICE gasoil): Volatile but supported, with dips bought while refinery and weather risks remain in focus.