Brent seeks a new equilibrium as supply recovers and costs rise

Oil is flowing again, but not through the same routes or at the same cost

The energy market is beginning to rebuild. According to estimates from JPMorgan and Goldman Sachs, Middle East oil flows are moving back towards levels seen before the conflict.

JPMorgan estimates that crude shipments have recovered to 17.5 million barrels a day, close to 98% of pre-war levels. Refined products such as petrol and diesel, however, are still only around 58% recovered.

But more oil does not necessarily mean cheap energy. Some barrels are now moving through longer and more expensive alternative routes, while Saudi Arabia is making greater use of the East-West pipeline to reduce its dependence on the Strait of Hormuz.

The system is becoming more resilient, but at a higher cost. Even the recovery in traffic through Hormuz says more about the industry's ability to operate under risk than about any genuine normalisation of security conditions.

The G7 moves before winter

The second pressure point is refined fuels. Temporary restrictions from some producers, and the possibility of new limits on diesel exports, had threatened to trigger a protectionist domino effect just before winter.

The G7's response is designed to avoid that outcome by sharing reserves and keeping trade flows open. The group has agreed to accelerate the release of up to 100 million barrels of crude and refined products over four months, with diesel prioritised during the first 20 days.

The measure buys time while supply recovers and lowers the risk of fresh trade restrictions. Yet it also highlights an obvious weakness: inventories remain very tight. Saudi Aramco has warned that rebuilding global inventories could take as long as two years.

US strategic petroleum reserves and light crude oil futures weekly

Source: TradingView, 5 October 2026

Europe is still paying the energy-dependence premium

The improvement is not benefiting everyone equally. Europe remains especially exposed because of its dependence on imports and its smaller margin for absorbing further disruptions.

That fragmentation is particularly visible in gas. While TTF and JKM remain close to annual highs and well above pre-conflict levels, the US Henry Hub price has moved back towards levels seen before the war.

The divergence gives the US a clear competitive advantage as an energy producer and raises costs for import-dependent economies. Saudi Arabia is also beginning to differentiate between destinations, cutting prices for some Asian customers while increasing the premium charged to Europe.

Natural gas futures daily: European TTF, Japan Korea JKM and US Henry Hub

Source: TradingView, 5 October 2026

EIA STEO: is a $74 Brent forecast for 2027 still sustainable?

The next test comes from the US Energy Information Administration's Short-Term Energy Outlook, due on Tuesday 6 October at 18:00. In September, the agency projected Brent crude near $91 a barrel during 2026, before easing to an average of $74 in 2027.

Since then, the market has become more resilient, but not necessarily more abundant. Middle East flows have recovered much faster than expected, reducing the risk of an immediate supply shock. Inventories, however, remain stretched, OPEC+ is still restraining production and the G7 continues to use strategic reserves to ease pressure on the market.

That will be the key question for the new STEO: is the normalisation of flows enough to justify Brent at $74, or does the new equilibrium require higher prices? Recovering supply points lower, but costlier alternative routes, the need to rebuild inventories and constrained production all point in the opposite direction.