Brent Crude Swings Between $105 and $110 as Middle East Supply Disruptions Cut Flows by Up to 7 Million Barrels Per Day

Oil markets whipsawed over the weekend and into Monday, with Brent crude touching $110 a barrel on escalating geopolitical pressures before pulling back sharply to around $105, down roughly 2.4% intraday, as traders absorbed a U.S. decision to waive newly imposed sanctions on Russia. WTI fell in parallel, dropping 2.21% to near $96.76 a barrel, after having rallied strongly the prior week.

The initial surge was driven by a combination of Ukraine resuming strikes on Russian energy infrastructure, intensifying attacks on tankers transiting the Bab el-Mandeb Strait, and reports that Saudi Arabia is evaluating security contingencies while Egypt weighs potential defensive support in the region. The Brent futures curve has moved into strong backwardation, reflecting tight near-term supply expectations.

Trafigura Chief Economist Rahim put hard figures on the disruption: Middle East crude flows are running 5 to 7 million barrels per day below pre-war levels, while refined product flows from the region are down 4 million barrels per day. Those figures underscore the scale of the supply shock already embedded in prices even after Monday's pullback.

The pullback from the $110 high came after the U.S. issued a waiver on Russia-related sanctions, raising hopes for additional diesel supply and easing some of the risk premium. The WTI rally last week relative to refined products also pushed the 3-2-1 crack spread to a 3.5-month low of roughly $55 a barrel Monday morning, down from approximately $75 in early September, squeezing simple refining margins. Indian equity markets felt the pressure too, with the Sensex falling more than 1,000 points from its intraday high as Brent near $110 stoked inflation fears among foreign investors.