Oil Prices Rise as Middle East Tensions Persist

Crude oil prices remained elevated this week as continued threats to shipping through the Strait of Hormuz and expectations of renewed military action following the U.S. midterm elections sustained a significant geopolitical risk premium.

Another decline in U.S. crude inventories helped support prices, with WTI approaching $105 per barrel and Brent reaching $118. Natural gas moved in the opposite direction, as increasing domestic production, above-average storage injections, and warmer-than-normal temperatures continued to delay seasonal heating demand.

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Oil

Fundamental Analysis

Oil prices remained elevated this week as concerns over an expected escalation in the Middle East following the U.S. midterm elections and persistent threats to shipping in the Strait of Hormuz sustained a significant geopolitical risk premium.

Another decline in U.S. crude inventories helped support the rally. WTI reached a weekly high of $104.99 per barrel on Friday and a low of $99.45 on Tuesday. Brent crude reached a Friday high of $118.00 per barrel, compared with Thursday's low of $114.90.

Both grades settled higher for the week. The WTI/Brent spread was approximately $13.00, while WTI has increased $11.50 per barrel since the beginning of October.

With only one trading day remaining before the U.S. midterm elections, market participants are increasingly focused on the possibility of renewed military action against Iran. According to the commentary, the Trump Administration has indicated that military operations could resume shortly after the elections.

Iran convened discussions with Saudi Arabia, Turkey, and Pakistan this week regarding the ongoing conflict, but no meaningful progress was reported. Vice President J.D. Vance reportedly sent a message to Iranian officials proposing a resumption of negotiations but had not received a response.

The United Kingdom Maritime Trade Operations confirmed an incident Friday involving a small vessel deploying explosive devices near a tanker. Iran's Islamic Revolutionary Guard Corps also claimed that three additional vessels struck mines and were disabled.

Oil shipments through the Strait of Hormuz are estimated at approximately 8.5 million barrels per day, about 49% of prewar volumes.

While reduced crude shipments remain a concern, the more significant global challenge continues to be the shortage of refined petroleum products resulting from damaged refining infrastructure in the Persian Gulf and Russia.

Persian Gulf producers are pursuing alternatives to reduce their dependence on the Strait of Hormuz for energy exports.

Saudi Arabia is exploring additional oil storage arrangements outside the region, while Abu Dhabi National Oil Company has informed customers that a second pipeline terminating at Fujairah in the United Arab Emirates is expected to become operational early next year, allowing additional crude exports to bypass the Strait.

Qatar, concerned about the security of its LNG exports, has also entered into alternative supply arrangements with other countries, including the United States.

OPEC+ is scheduled to meet virtually on Sunday, with members expected to maintain current production levels.

Meanwhile, European Union governments are releasing approximately 42 million barrels from strategic reserves over the next three months, with diesel accounting for roughly half of the planned releases.

Russia continues restricting diesel exports, with an exception for its recently announced agreement with the Trump Administration. Ukraine has continued targeting Russian refineries despite U.S. requests to halt those attacks.

Yemen-based Houthi forces have also claimed responsibility for damaging at least two refineries in Saudi Arabia, adding further uncertainty to regional refined-product supplies.

U.S. Petroleum Snapshot

The Energy Information Administration's Weekly Petroleum Status Report indicated that commercial crude oil inventories decreased by 1.9 million barrels to 410.6 million barrels, approximately 4% below the five-year average.

The American Petroleum Institute had forecast a 2.0 million-barrel draw, while analysts expected a smaller decline of approximately 100,000 barrels.

Gasoline inventories increased by 3.9 million barrels to 209 million barrels, approximately 2% below the five-year average. Distillate inventories decreased by 1.5 million barrels to 103 million barrels, approximately 10% below the five-year average.

Refinery utilization declined to 92.8% from approximately 93.4% the previous week, while crude inputs decreased by approximately 125,000 barrels per day to 16.5 million barrels per day.

Gasoline demand declined to 8.6 million barrels per day, compared with approximately 8.9 million barrels per day the previous week.

Crude imports increased to 6.4 million barrels per day from 5.8 million barrels per day, while crude exports rose to 4.9 million barrels per day from 3.4 million barrels per day. Refined-product exports increased to 7.7 million barrels per day from 7.4 million barrels per day.

The Strategic Petroleum Reserve remained at approximately 283 million barrels, its lowest level since 1982. Inventories at Cushing, Oklahoma declined by 625,000 barrels to approximately 27.0 million barrels, representing about 35% of storage capacity.

U.S. crude production rebounded to approximately 14.0 million barrels per day, compared with 13.3 million barrels per day the previous week and 13.6 million barrels per day a year earlier.

The U.S. oil and gas rig count remained unchanged at 603, compared with 546 a year ago. Oil-directed rigs increased by two, while natural gas rigs declined by two.

Average gasoline prices declined to $4.20 per gallon, down $0.09 from the previous week but $1.16 above year-earlier levels. Diesel prices remained unchanged at $6.32 per gallon, approximately $2.63 higher than a year ago.

U.S. refineries continue operating at utilization rates above 90%, with some facilities deferring routine maintenance to meet strong diesel demand.

On the economic front, the Personal Consumption Expenditures Price Index, the Federal Reserve's preferred inflation measure, increased 3.6%, in line with expectations and above August's 3.4% reading.

Higher energy prices remain a concern for inflation, potentially increasing pressure on the Federal Reserve to raise interest rates. Three Federal Reserve officials indicated support for a possible December rate increase.

U.S. GDP increased 3.4% during the second quarter of 2026, compared with 2.2% in the first quarter. Much of the growth was attributed to increased investment in hyperscale artificial intelligence data centers.

A technology-sector selloff on Friday pushed the Dow Jones Industrial Average, S&P 500, and Nasdaq lower. All three indexes finished down for the week. The U.S. dollar moved slightly higher, while gold traded below $4,000 per ounce.

Oil – Technical Analysis

December WTI NYMEX futures continued trading above their 8-, 13-, and 20-day moving averages, reflecting the strength of the recent rally.

Trading volume was approximately in line with the recent average at 240,000 contracts.

The Relative Strength Indicator reached approximately 67, reflecting strong upward momentum and approaching traditionally overbought conditions.

Oil – Looking Ahead

Reports indicate that the U.S. military has prepared plans for renewed operations against Iran following Tuesday's midterm elections, with regional allies reportedly advised to prepare for that possibility.

The potential escalation, combined with continuing threats to commercial shipping, could sustain elevated crude oil prices and transportation costs.

As colder temperatures begin reaching the Northeast, demand for heating oil and ultra-low sulfur diesel is expected to increase. Some homeowners are already experiencing significantly higher heating-oil delivery costs as residential demand competes with trucking and industrial consumption.

However, the 8–14-day weather forecast suggests above-normal temperatures across much of the country, potentially limiting near-term heating-oil demand.

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Natural Gas

Fundamental Analysis

December NYMEX natural gas futures continued declining this week as domestic production increased and seasonal heating demand remained limited by warmer-than-normal temperatures.

An above-average storage injection added further downward pressure to prices despite the approaching winter season.

Natural gas reached a weekly high of $3.18/MMBtu on Monday and a low of $2.62 on Friday, according to the commentary.

Natural gas demand was estimated at approximately 105 Bcfd, with lower power-generation consumption partially offset by increased residential demand. Supply was estimated at approximately 117 Bcfd.

LNG exports reached a new high of 20.6 Bcfd, while natural gas exports to Mexico were approximately 6.9 Bcfd.

European heating demand is beginning to increase as winter approaches, with natural gas storage levels across the European Union estimated at approximately 75% of capacity.

European natural gas prices have reached levels not seen since 2022 amid concerns about LNG availability heading into winter.

U.K. NBP natural gas was quoted at $34.15/MMBtu, Dutch TTF futures at $32.80/MMBtu, and Asia's JKM at $32.05/MMBtu.

European and Asian buyers continue competing for available LNG shipments, pushing international prices to their highest levels in approximately four years.

The EIA's Weekly Natural Gas Storage Report indicated an injection of 80 Bcf, compared with a forecast of 75 Bcf and a five-year average injection of 70 Bcf.

Total working natural gas in storage increased to 3.724 Tcf, approximately 3.5% below the previous year but 1.0% above the five-year average.

Natural Gas – Technical Analysis

December NYMEX Henry Hub natural gas futures are trading near the lower Bollinger Band and below their 8-, 13-, and 20-day moving averages.

Trading volume was below the recent average at approximately 150,000 contracts.

The Relative Strength Indicator declined to approximately 25, indicating deeply oversold momentum conditions.

Natural Gas – Looking Ahead

Natural gas production remains relatively steady, while above-normal temperatures continue delaying the onset of typical fall heating demand.

LNG exports are expected to remain strong, supported by elevated international natural gas prices and continued demand from Europe and Asia.

The surplus of natural gas in storage relative to the five-year average continues to narrow.

With 3.724 Tcf in storage and only one week remaining in the official injection season, an additional 276 Bcf would be required to reach 4.0 Tcf by November 1.

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Weekly Oil & Gas Commentary is provided for informational and educational purposes and should not be considered investment, trading or financial advice.