The Strait, the Shortage, and the Price: What Is Really Driving Oil Above $105

There is a particular kind of clarity that arrives when a market stops responding to headlines and starts responding to barrels. Brent crude is trading near $105.58 a barrel this morning, up more than 3 percent, and West Texas Intermediate is holding just below $100 at $99.83. The move is not speculative. It is the arithmetic of a world that is consuming more oil than it can reliably move, and the institutions that measure that imbalance have now confirmed it in their official data.

The IEA Has Rewritten the Balance

The most consequential document published this month is the International Energy Agency's September Oil Market Report. The IEA cut its 2026 global oil demand forecast to a decline of 2.5 million barrels per day, 940,000 barrels steeper than its August estimate and the largest annual average drop since the pandemic shock of 2020. That is the demand side. The supply side is more alarming. The agency now projects global oil supply to average 100.7 million barrels per day in 2026, a year-on-year decline of 5.7 million barrels per day, or roughly 6 percent of the world's total supply. The IEA no longer expects the Strait of Hormuz to reopen for shipping this year, and it has warned that commercial inventory buffers are being depleted so rapidly that further demand compression may be necessary to close the gap.

Those are not forecasts of convenience. They are the conclusions of the organization that member governments rely on to understand the physical state of the oil market. And they describe a supply shock that is larger than any the world has experienced since the pandemic.

The Strait Is Not Closed, But It Is Not Open

The Strait of Hormuz is the single most important oil chokepoint on earth. Under normal conditions, roughly 20 million barrels per day transit the waterway. The conflict between the United States and Iran has reduced that flow dramatically, but not to zero. Recent data shows that oil flows through the strait have topped 13.5 million barrels per day, led by a surge in Saudi Gulf loadings, according to Kpler data compiled by Commodity Context. That represents roughly 60 percent of pre-conflict levels. Some oil is moving. Not enough is moving.

The diplomatic picture remains unresolved. Iranian Foreign Minister Abbas Araghchi met with US officials in New York last week, the first public contact between the two sides since June, and conveyed conditions for reopening the strait. Tehran has demanded the immediate lifting of the naval blockade, the unfreezing of Iranian assets, and an end to hostilities on all fronts. Washington has not accepted those terms. US Treasury Secretary Scott Bessent said on Sunday that Iran's remaining crude exports to China, its last significant customer, will be effectively cut off within two weeks as the American blockade prevents new loadings. Tehran has approximately 15 million barrels of crude at sea awaiting delivery. When those barrels arrive, Iran will have nothing left to sell, according to the American assessment.

OPEC+ Has Stepped Back

The producers who could theoretically fill the gap have chosen not to. OPEC+ confirmed on September 6 that it will keep its October production quotas unchanged from September levels. Saudi Arabia's quota stands at 10.478 million barrels per day, Russia's at 9.949 million, Iraq's at 4.431 million, Kuwait's at 2.676 million, Kazakhstan's at 1.628 million, Algeria's at 1.007 million, and Oman's at 841,000. The total quota for the group, minus compensation adjustments, is 31.01 million barrels per day.

The decision to pause the phased rollback of earlier cuts reflects a judgment that adding barrels into a market where physical export capacity is constrained by conflict would not stabilize prices. It would simply shift the shortage from one region to another. The quota system is less meaningful when the members who hold the largest quotas cannot physically deliver the volumes they are allocated.

What the Prices Are Saying

The price action reflects this reality. Brent is trading near $105.58, having recovered from a low near $98 earlier in the week. WTI is at $99.83, holding just below the psychological $100 level. The spread between the two benchmarks has widened, a reflection of the premium that international buyers are willing to pay for seaborne crude that can be delivered outside the constraints of the American pipeline system. Gasoline in the United States has climbed above $4.30 a gallon, and diesel, the fuel that moves the physical economy, is above $6 a gallon.

The technical picture shows Brent trading above its 5-day moving average at $103.34 and well above its 30-day average at $98.93. The immediate resistance sits near $107.75, the intraday high from Monday's session, followed by the 2026 high near $120.57. WTI faces resistance at $100.02, with the next layer near $106.87. On the downside, the $96.28 low from Monday's session is the first support, with a deeper floor near $91.

What Comes Next

The variables that will determine the next leg are not technical. They are diplomatic. If the Strait of Hormuz reopens, the geopolitical premium embedded in prices will compress, and the supply projections will improve. If it remains constrained, the IEA's warning about inventory depletion will become the operative framework, and prices will remain elevated. The OPEC+ quotas are largely irrelevant while the conflict persists. The market is trading the physical availability of crude, and that availability is determined by events in the Middle East that no producer group can control.
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