Oil slipped slightly today as worries about Middle East supply disruptions eased and the International Energy Agency revised down its demand outlook. Brent fell toward $104/bl after rising 1.3% over the first three sessions of the week; yesterday it traded around $106.30. West Texas Intermediate is trading near $94. This is an important signal because in recent days prices repeatedly jumped on news of fresh attacks, yet today the market materially shaved off part of the geopolitical risk premium for the first time.
The situation in the Middle East nevertheless remains tense. Iran-backed Houthis continue to launch missiles and drones into Saudi territory, but it is still unclear whether this has affected flows from the world's largest oil exporter.
The IEA's forecast deserves attention. Global oil consumption is now expected to decline by 2.6 million barrels per day this year — 100,000 b/d more than assumed a month ago. The agency says year-on-year demand growth will not resume until March. Weaker demand benefits oil consumers, primarily in Asia and Europe, while producers suffer lower prices amid ongoing logistics risks.
Still, the market remains tight after months of disruption linked to the US-Iran conflict, which has pushed Brent more than 70% higher year-to-date. Consumers are drawing inventories, and onshore crude stocks have fallen to levels near their lowest in at least ten years. Freight costs have also risen due to shipping disruptions, adding pressure on the physical market. For these reasons, today's price decline cannot be treated as a durable reversal — the structural supply shortfall remains.
Logistics in the Middle East are also deteriorating. More tankers are avoiding usual loading areas, which indicates that intensifying Iranian attacks on shipping are complicating exports. At the same time, media reports say the US is considering easing sanctions on vessels of the so-called shadow fleet that carried oil from Russia, Iran and Venezuela to ease global freight rates. That could free up some ships, but it is unclear whether firms would use them.
Diplomatic prospects for de-escalation remain murky. The uncertainty points to a prolonged, frozen conflict in which occasional positive news is interrupted by new attacks. A return to full-scale hostilities could send prices sharply higher again.
While the Houthis have not yet disrupted Saudi exports and demand is weakening, Brent is likely to drift around $104 and could fall further in the absence of major attacks. However, I wouldn't call that a reliable scenario: inventories are at multi-year lows, freight is expensive, and a "frozen conflict" still carries the risk of sudden escalation.
Technical picture — oil
Buyers need to take the nearest resistance at $96 to target $100, above which a breakout will be difficult. The farther upside target is the $104 area. On the downside, bears will try to seize control of $82; if they succeed, a range breakdown would inflict serious damage on bull positions and push oil down to $89, with the prospect of extending to $87.
