Oil: Anatomy of a War Premium: How Gulf crude exports recovered to more than 75 percent of pre-war levels, and why the price set a five-month high on the fragility of that recovery

Report summary

A war premium is not a number a market decides once. It is rebuilt and dismantled every session, and the seven weeks from early September have now shown the whole cycle twice. Brent futures settled at 97.31 dollars a barrel on 7 September, reached 108.52 dollars on 15 September, then gave up 9.07 dollars across five consecutive sessions to 22 September. One afternoon took much of it back: on 23 September, after Iran's president told the United Nations that Tehran would never surrender and its security chief said the strait would stay shut, Brent settled 3.65 percent higher. October then ran the rebuild at full length. By 16 October the front contract had settled at 109.86 dollars, 3.94 dollars or 3.72 percent higher on the day and its highest settlement since 19 May, after touching 110 dollars intraday for the first time since May, as the wire's settlement report carried it. From the 22 September trough the contract has regained 10.41 dollars, or 10.5 percent, across the late September contract roll, on our calculation. What changed between the two rebuilds is the reason this report needed rewriting. September's premium was a price on closure: the strait was carrying roughly a third of its pre-war volume and every adjustment was defensive. By mid-October the physical account had done something it had not done since March. It got better.