Crude oil prices weakened during Monday’s trading session (October 19) following a sharp rally late last week that was deemed technically overextended. Brent crude fell by approximately 1.4% to US$108.27 per barrel, while West Texas Intermediate (WTI) declined by 0.41% to US$100.99 per barrel. Downward pressure also stemmed from signs of softening physical demand, even as geopolitical risks in the Middle East remain elevated.
The preceding price surge had pushed oil into "overbought" territory, triggering profit-taking. Meanwhile, the continued flow of oil through the Strait of Hormuz has helped alleviate some market panic. Oil shipments from the Gulf region have reportedly returned to near pre-conflict levels, although the transport of refined petroleum products continues to face challenges.
The market is also monitoring Iraqi oil exports, which are nearing pre-war levels. This suggests that despite the fragile security situation in the Strait of Hormuz, a significant portion of supply is still reaching the market. Consequently, the market must weigh the ongoing risk of supply disruptions against signs that oil flows are recovering.
Nevertheless, geopolitical risks remain. Houthi attacks on key export hubs and reports of strikes on oil tankers in the Gulf region continue to pose threats to energy distribution. Furthermore, the Russia-Ukraine conflict adds a layer of uncertainty, as attacks on Russia’s energy sector could potentially disrupt the supply of refined products.
Regarding U.S. policy, President Donald Trump has reportedly eased tariffs and sanctions on Russian energy shipments as part of an effort to support peace talks with Ukraine. This move could increase supply flexibility and exert downward pressure on oil prices—particularly if more Russian oil and energy products re-enter the market.
Newsmaker Analysis: The current weakness in oil prices is primarily a reflection of profit-taking and a recovery in supply flows, rather than an abatement of geopolitical risks. Brent remains at a high level as the market continues to price in a risk premium related to the conflict in the Middle East and disruptions to shipping. Looking ahead, the direction of oil prices will largely depend on developments in the Strait of Hormuz: if supply flows continue to recover, prices may see a correction, but an escalation in attacks could push oil prices higher once again.