ING analysts Warren Patterson and Ewa Manthey note that Brent rallied strongly last week, supported by escalating Gulf risks and renewed attacks on Russian refineries. They highlight market nervousness ahead of US midterm elections, with traders weighing potential US–Iran hostilities against a tentative diplomatic track. Speculative positioning in ICE Brent remains below March highs, leaving room for further longs if a strong catalyst emerges.

Brent supported by Gulf tensions

“Oil prices finished strong last week, with ICE Brent settling almost 2.4% higher on Friday to close above $113/bbl. It was also the Dec-26 contract expiry; it settled at $117.64/bbl on its last trading day. Vessels have faced a growing number of attacks in recent weeks.”

“The price action in oil in recent weeks reflects a market increasingly bracing for the potential for more hostilities between the US and Iran. If the midterms pass with neither strikes nor a deal, the key question is whether the market continues to price in a substantial geopolitical risk premium or whether that premium gradually begins to unwind. Given that many of the key developments in this conflict have unfolded over weekends, the market may have to hold its breath until the end of the week.”

“Meanwhile, in Russia, the brief respite that refiners received from Ukraine appears to have ended. Attacks on Russian refiners resumed towards the end of last week. The roughly 2-week pause had seen the ICE gasoil crack fall below $70/bbl and trade to its lowest level since early October.”

“The latest positioning data shows that speculators increased their net long in ICE Brent by 3,576 lots over the last reporting week to 245,457 lots as of last Tuesday. Fresh longs drove the move. Meanwhile, the net speculative long is still some distance away from the year-to-date high of around 430k lots seen in March.”