Oil has gone from $75 to $100 in five weeks. WTI crude traded at $99.38 a barrel on Thursday afternoon and Brent at $104.77, both up about 7% in two days. WTI is now roughly a third above its early-August low near $75. Here is what is pushing prices higher, and why the rally has been so hard to stop.
1. Attacks on shipping just got bigger
The trigger for this week's jump was a sharp escalation at sea. US forces destroyed five tankers run by Iran's Revolutionary Guard on Tuesday, four of them off Oman and a fifth near Kharg Island, the terminal that handles most of Iran's exports. The Guard answered on Wednesday with a claim that it had struck eight tankers and two US destroyers. Washington has not confirmed any damage to its ships.
Not since the fighting began on February 28 had either side gone after so many vessels at once, and the exchange sent Brent past $100 for the first time since July.
Before the conflict, roughly one barrel in five sold worldwide passed through the Strait of Hormuz. Kpler data cited by Al Jazeera put the count at only about 10 commodity carriers a day in the 10 days through Monday. US warships have kept Iranian ports under blockade since April. Mohsen Rezaei, the new head of Iran's Supreme National Security Council, said Sunday that Tehran will soon declare an "exclusion zone" running from the blockade line up to the strait. Nobody knows yet what that means for ships trying to pass.
2. Saudi Arabia's workaround is breaking down
For months, Saudi Arabia kept barrels moving by sending crude west by pipeline to Yanbu on the Red Sea, skipping Hormuz entirely. That escape route is now under fire too.
The kingdom told OPEC its production fell to 6.24 million barrels a day in August, down 1.9 million from July and the lowest since 1990, Bloomberg reported Thursday. Exports dropped to 3.2 million barrels a day, the least in 13 years, according to Al-Monitor.
The reason is Yemen's Houthis. They declared a naval blockade of Saudi Arabia on July 20 and have struck Saudi facilities repeatedly since, including two hits on the Jazan refinery in a month. Al-Monitor counted just two Saudi cargoes getting out past Bab el-Mandeb over the past week. When the biggest exporter on earth loses both of its doors at once, there is no cheap way to replace those barrels.
3. The world has been living off stockpiles
Prices did not spike earlier because buyers drained inventories instead. That cushion is getting thin.
In its outlook published Wednesday, the Energy Information Administration estimated that global oil stocks are down about 400 million barrels since the start of the year. Inventories fell at a pace of 3.9 million barrels a day in the second quarter and about 3 million a day in the third. The agency puts August's shut-in crude output at 6.7 million barrels a day, compared with 5 million in July.
The US has leaned hard on its Strategic Petroleum Reserve. President Trump authorized a 172 million barrel release in March, the largest any single country has ever announced, and by the end of August the reserve held 286.6 million barrels, its lowest level since 1983, according to EIA data. The EIA also expects US distillate stocks to slip below 100 million barrels this month. That is why diesel hit a record $5.94 a gallon this week and regular gasoline averages $4.22, according to AAA.
4. Demand is not backing off
High prices usually cure themselves by killing demand. So far, that is not happening fast enough. China, the biggest crude buyer in the world, took in 8.93 million barrels a day in August, up 6.2% from July and the second straight monthly gain, customs data show. Imports are still 23% below a year ago, but refiners are restocking, pulling in Russian ESPO crude and even cargoes from Argentina.
Beijing also loosened limits on fuel exports. Chinese refiners shipped out 6 million tons of products in August, 29% more than in July, to cash in on a global diesel shortage. Every extra barrel China buys is one fewer for everyone else.
5. Nobody has spare barrels to add
In a normal squeeze, OPEC+ would open the taps. This time it has nothing left to open. The group's seven core members held October quotas flat at a meeting on September 6, having already unwound all 1.65 million barrels a day of earlier cuts. Paper quotas do not help when the pipes and ports are the problem.
"OPEC+ currently has very limited power over the physical oil market," said Jorge Leon of Rystad Energy. "The group can change production targets on paper, but it cannot guarantee that those barrels will be produced or actually reach the market."
No quick fix in sight
Traders also heard the president say there is no near-term deal to hope for. Speaking to reporters at Joint Base Andrews on Wednesday, Donald Trump said: "Right after the election, oil prices are going to be tumbling downward. I think it's going to take a little bit longer than the midterm." The midterm elections are on November 3. For a market already short of barrels, that reads as two more months of the same.
What to watch
- The EIA's weekly inventory report, pushed to Thursday by the Labor Day holiday
- Details of Iran's planned exclusion zone, and whether tankers keep transiting Hormuz
- Whether Saudi cargoes can get through the Red Sea again
- The OPEC+ meeting on October 4
The EIA's base case still has Brent averaging about $90 in the second half of this year and easing to $77 by the second quarter of 2027, but only if Hormuz flows gradually recover. The agency does not see most Middle East output and trade getting back to normal until the second quarter of 2027. Until the shipping lanes calm down, the path of least resistance stays up.