Oil Prices Fall 32% From Peak As Supply Recovers Despite Iran War

Oil prices have fallen sharply from their October highs as a recovery in Middle Eastern exports pushes global supplies above demand for the first time since the Iran war began, even as President Donald Trump maintains the U.S. blockade and attacks on tankers continue.

North Sea Dated crude, a benchmark used to price physical oil shipments, has dropped 32% from a peak of $136 a barrel in early October to around $93, according to a new report from the International Energy Agency released Friday. Prices, however, remain approximately $22 above their prewar levels.

The decline has also been reflected in oil futures, with Brent crude and U.S. West Texas Intermediate (WTI) heading for a second consecutive weekly loss. Brent was trading near $95.45 a barrel Friday morning, while WTI stood around $88.06, leaving both benchmarks on course for declines of nearly 3% for the week.

The reversal comes after months of disrupted shipments through the Strait of Hormuz, a critical waterway for global energy supplies, and follows a significant increase in production from Gulf countries.

Global oil output rose by 2.3 million barrels per day in October to 105.4 million barrels daily, following an increase of 3 million barrels per day in September, the IEA said. Production was 5.3 million barrels per day higher than in August, narrowing the supply shortfall created by the conflict.

Oil exports from Gulf producers, excluding Oman, recovered to 18.4 million barrels per day in October, about 74% of their prewar levels. Crude exports alone reached 15 million barrels daily, equivalent to 82% of the volumes recorded before the fighting.

The stronger shipments have prompted the agency to revise its outlook for the final months of the year. It now expects global oil supplies to exceed demand during the fourth quarter, with a larger surplus projected for next year.

Inventories are also beginning to recover. Observed global oil stocks increased by 52 million barrels in October, their first monthly rise since June, largely because more crude was being held aboard tankers as exports increased.

The improvement has come despite continuing attacks on commercial vessels and energy facilities across the Middle East.

Trump said Thursday that reaching an agreement with Iran was not necessary to end the war, suggesting Washington would continue relying on its blockade and economic restrictions rather than pursue another major military escalation.

The president's remarks followed renewed attacks on Saudi energy infrastructure and tankers moving through the Gulf, which had briefly pushed crude prices higher earlier in the week.

Yemen's Iran-aligned Houthi movement claimed responsibility for attacks on Saudi Arabia's East-West oil pipeline, facilities near the Red Sea port of Yanbu and a Saudi Aramco building in Riyadh. The reported attacks renewed concerns about the security of infrastructure used to move oil around the region.

Iran's military also claimed Thursday that explosions had struck four tankers in the Strait of Hormuz after the vessels disregarded warnings. The claims could not be independently verified, Reuters reported.

A fresh incident was reported Friday when Iran's Revolutionary Guard said a liquefied petroleum gas tanker had struck a naval mine and suffered an explosion while passing through the strait.

The Guard claimed the vessel had ignored repeated warnings and entered a restricted shipping route. The account, carried by Iran's state-run IRNA news agency, could not be independently confirmed, and the United Kingdom Maritime Trade Operations agency had not immediately reported the incident, according to The Associated Press.

The continuing security risks have not prevented oil shipments from recovering, but the IEA warned that maritime attacks could disrupt the expected return to a more balanced market.

Signs of improving supply have also emerged in the United States, where crude and refined fuel inventories increased last week.

Commercial crude inventories rose by 4.7 million barrels to 414.4 million barrels, according to the Energy Information Administration's latest petroleum data. The increase ended five consecutive weeks of declines and was considerably larger than analysts had expected.

Gasoline inventories climbed by 1.8 million barrels to 210.8 million, while distillate stocks, which include diesel and heating oil, increased by 4.1 million barrels to 103.3 million.

The increases came alongside higher crude imports and weaker demand for some refined products. U.S. crude inventories nevertheless remained about 4% below their five-year seasonal average.

The recovery in crude supplies has also failed to bring all fuel prices back to normal, particularly diesel, which remains in short supply internationally.

European diesel prices have fallen 11% from their October highs but remain approximately 77% above prewar levels, at close to $180 a barrel, the IEA said.

Continued attacks on Russian energy infrastructure have restricted diesel exports, while disruptions to Middle Eastern refineries and shipments have further reduced supplies.

The agency expects additional emergency diesel stocks to be released over the coming months to help bridge the shortage until refinery production recovers.

Demand has also been affected by months of elevated energy prices. The IEA forecasts that global oil consumption will decline by 2.7 million barrels per day this year to 102.3 million barrels daily before recovering by around 2 million barrels per day next year.

Production is expected to rebound more strongly, increasing by 6.6 million barrels per day in 2027 to an average of 108.1 million, with Gulf producers accounting for much of the growth.

For now, the recovery remains uneven. Oil inventories held on land are still at their lowest level since at least 2016, while observed global stocks have fallen by a cumulative 462 million barrels since the war began.

The IEA warned that a sustained recovery will depend heavily on the security of maritime shipping routes, with continued attacks posing a risk to its forecast of a larger supply surplus next year.