Oil markets believe the war is ending

XBR/USD

Key zone: 88.50 - 91.50

Buy: 92.50 (on strong positive fundamentals); target 95.50-97.50; StopLoss 91.80

Sell: 87.50 (on a decisive break above 90.00); target 85.50-83.50; StopLoss 88.20

Brent plunged nearly 6% in a single trading session following Trump's statements about a reduced likelihood of further strikes against Iran. Market participants are aggressively reducing the war risk premium despite ongoing attacks on vessels and the absence of agreed terms for a peace settlement.

The main threat is another sharp repricing of oil if negotiations fail. The Strait of Hormuz remains an area of heightened military risk, while the US and Iran continue to have significantly different positions regarding the terms of a settlement.

To assess the situation objectively, it is necessary to distinguish between three indicators: oil production volumes, export shipments, and the actual delivery of crude oil to end buyers. These figures may follow noticeably different trends. Analyzing such discrepancies is precisely what makes it possible to assess whether the market's repricing is justified.

A reminder:

Before the armed conflict began, approximately 20 million barrels of crude oil and petroleum products were transported through the Strait of Hormuz every day. According to an IEA study published in February, crude oil and condensate transit in 2025 amounted to 14.95 million barrels per day, while petroleum products accounted for 4.93 million barrels. Total volume reached 19.87 million barrels per day, representing approximately one-quarter of global seaborne oil trade.

While oil prices are responding primarily to changes in political rhetoric, the actual recovery of seaborne supplies remains uncertain.

Iraq and Kuwait remain the most vulnerable, with limited capacity to redirect significant crude oil volumes through existing bypass pipelines. Saudi Arabia and the UAE have alternative export routes, but their capacity is insufficient to fully replace prewar transit volumes. Meanwhile, Saudi oil infrastructure remains vulnerable to potential strikes.

How Much Oil Is Actually Being Exported From the Persian Gulf?

Shipping statistics from early November reveal a significant discrepancy between observed oil tanker activity and estimated actual export volumes. Several factors may cause AIS data to underestimate real cargo flows.

• Some vessels cross dangerous sections of shipping routes with their transponders switched off.
• Ship-to-ship oil transfers may take place outside the strait. As a result, the tanker carrying the cargo onward is no longer counted as a standard outbound voyage from the Persian Gulf.
• Export operations through Fujairah and Yanbu do not require tankers to pass through the Strait of Hormuz at all.

According to an independent analytical study by Reeve Hayward dated November 8, during the seven-day period ending November 3, average daily supply volumes through the strait and associated opaque shipping routes amounted to approximately 11.5 million barrels, or 67% of the comparable prewar level. A broader measure of regional supplies, including alternative terminals, reached 19.3 million barrels per day, equivalent to 83% of the previous volume.

The difference between these indicators is fundamentally important for assessing the oil market.

Analyzing only the number of vessels with active AIS systems could lead to the erroneous conclusion that regional exports have almost completely stopped. However, more comprehensive estimates of physical cargo flows paint a less critical picture than tanker-tracking statistics suggest.

So What Is the Outcome?

A decline in physical oil prices does not indicate that the global oil market has returned to its normal balance. Supplies may be maintained through protected transportation corridors, alternative export terminals, or the use of previously accumulated inventories.

The resumption of full tanker traffic along the main route depends on more than a political decision to reopen the Strait of Hormuz. Shipowners and insurance companies need acceptable guarantees of transportation safety. If freight rates and insurance premiums remain elevated, physical oil deliveries will continue to incur additional costs, even if Brent futures prices decline.

Ending large-scale strikes is not enough to completely eliminate the war risk premium from oil prices. Nevertheless, optimistic signals about a possible end to the conflict could sustain further oil selling. However, the threat of new attacks forces market participants to maintain defensive positions.

So we act wisely and avoid unnecessary risks.

Profits to y’all!