Market Perspectives: Why is oil stuck at $100/barrel?

Oil prices are likely to remain elevated and volatile because improving crude flows are being offset by disrupted supply chains, constrained refining capacity and persistent geopolitical risks.

• Shipping traffic through the Strait of Hormuz increased in September, with oil flows recovering to an estimated 85–90% of pre-conflict volumes, but this has not produced a commensurate fall in crude prices.
• Inventory rebuilding is sustaining demand, while renewed attacks on shipping in October and the first US retaliation over the weekend show that the route to normalisation remains fragile.
• Iran continues to dispute the terms of traffic through the Strait of Hormuz, and possible further US military action means a renewed broadening of the conflict cannot be excluded.
• Russia’s refining network has suffered significant damage from Ukrainian attacks, while reports of a possible ceasefire covering energy infrastructure remain unconfirmed and resemble similar headlines from September that produced no lasting relief.
• Refining capacity is constrained in the US, Europe, Russia and the Middle East, keeping diesel prices substantially higher relative to crude; disruption also affects liquefied natural gas, sulphur and fertiliser.

Takeaway: Better shipping data are encouraging, but investors should not mistake higher transit volumes for a complete solution, as refining bottlenecks and geopolitical risks are likely to sustain a substantial risk premium in oil and refined products.