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What happened to oil—from $118 down to the $90s?

The sharp decline in oil prices has been confirmed. Brent crude, which peaked above $118 on October 30, has retreated by approximately 18%, falling below the $100 mark for the first time since October 7 and closing the week with a loss of over 12%. It has been verified that WTI is trading around $90, and the prices displayed for both Brent and WTI are consistent with live market data. The catalyst for this drop—expectations of negotiations between the U.S. and Iran—has been confirmed by various sources, pointing to discussions facilitated by Qatar and an offer from Iran to potentially reopen the Strait of Hormuz within two days. At the same time, it has been confirmed that attacks on tankers are continuing and that OPEC+ has maintained its production targets for December.

What does this massive, one-week swing—from $118 down to the $90s—actually mean?

You look at your screen and see Brent trading in the $96–$100 range, with WTI just above $90; yet, only a week ago, those same screens showed a completely different picture. After reaching $118 per barrel on October 30, Brent broke through the psychological $100 threshold following a wave of one-sided selling in the wake of the election results, ending the first week of November with a loss of more than 12%. During the same period, WTI fell from $105 to $87—a weekly swing of a magnitude not seen in nearly two years.

The key to this decline is that not a single new barrel of oil entered the market on Monday. Brent dropped by more than 6% that day, yet there was no new oil in the storage tanks; what was being priced in was the possibility that the war might come to an end. A portion of the price of oil never reflects the true cost of a barrel; rather, it is a "fear premium" tacked on at the wellhead. That premium evaporated this past week.

The lesson here is that oil is a two-layered asset: one layer consists of physical supply and demand, while the other is driven by geopolitical expectations. The candlestick patterns you follow are, more often than not, merely the shadows cast by this second layer. The key question to watch is this: if negotiations lead to a formal agreement, will prices remain below $100, or will the premium return the moment those talks fail?

The Strait of Hormuz 👀

At the heart of this story lies a narrow strait through which a significant portion of the world’s seaborne oil passes. The conflict that began in late February effectively blocked this passage for months, resulting—in the words of the International Energy Agency—in the largest supply disruption in the history of the global oil market, with approximately 4.5 million barrels per day taken offline during the final quarter. The more than 50% surge in oil prices since February was entirely attributable to this disruption.

Now, there is a proposal on the table: Iran has announced that if its demands regarding sanctions and the release of frozen assets are met, it could reopen the strait within two days. Discussions, facilitated by Qatar, center on a seven-day plan, and the U.S. President has stated that no new attacks are being planned, noting that "we have gotten everything we wanted." With both wings of the opposition claiming victory on election night, the market concluded that the likelihood of a prolonged conflict had diminished—triggering a sharp drop in oil prices alongside a recovery in equity markets.

However, it is worth pausing here to catch one’s breath: the strait has not yet been reopened. Even during days when sell-offs intensified, new attacks on tankers were reported in the region; on Monday morning, prices opened lower despite reports that vessels in the strait had been struck. This serves as evidence that the market has shifted toward a "peace scenario," though it has yet to reach the reality of actual peace. What should one watch for? News of a signed agreement—or, conversely, news that negotiations have hit a deadlock—could trigger a $10 swing in either direction.

Why has OPEC+ chosen to sit on its hands?

With prices swinging so wildly, the question of what the cartel is doing becomes critical. The answer: it has chosen to do nothing. Seven core members left their December production targets unchanged—marking the third consecutive month of such inaction—which signals that the group has no desire to introduce new barrels into the market amid this uncertainty. Moreover, most members are already pumping well below their assigned quotas, meaning that even a decision to increase production would have remained purely theoretical.

Think of the current dynamics as a narrative: the cartel is simultaneously trying to compensate for exports lost due to the conflict while fearing a supply glut should peace return and those barrels re-enter the market. Consequently, they have adopted a strategic "wait-and-see" stance ahead of the major meeting scheduled for November 29. That meeting will determine quotas for 2027, effectively setting the framework for oil prices over the coming year.

The dilemma on the supply side is clear: while the cartel’s production cuts may provide a floor for prices, international institutions are warning of a potential supply surplus for 2027 should the strait reopen and those sidelined barrels return to the market. In other words, the two milestones that will clarify the timeline are the capacity revision in mid-November and the summit on November 29.

What does the spread between Brent and WTI tell us?

The gap between these two contracts—a spread that has hovered above $10—is no coincidence; it is the least-discussed character in this entire story. Brent represents the global market and risks associated with maritime transport, while WTI largely reflects the domestic balance within the United States. Because the situation in the Strait of Hormuz directly impacts seaborne oil, a risk premium accumulates primarily on Brent. When the Strait becomes a focal point, Brent tends to fall more sharply, causing the spread to narrow; conversely, when news of an attack emerges, the spread widens once again.

In effect, this spread acts as a thermometer for the market’s geopolitical sentiment. As a conflict escalates, the premium of Brent over WTI deepens; as prospects for peace strengthen, that premium diminishes. We witnessed both dynamics this week: news of attacks widened the gap, while reports of negotiations caused it to narrow. Consequently, rather than tracking the two contracts in isolation, an investor who monitors the spread between them can discern the core question weighing on the market: when will the Strait be open?

It is also worth noting that the repercussions of the conflict have reached the retail level. For American consumers, gasoline prices at the pump are roughly 39% higher than they were before the conflict—a clear indication that energy inflation has become a global issue. Oil is no longer merely a commodity; it has become a variable that dictates the fate of price tags worldwide. What should one watch for? If the Brent-WTI spread falls below $10, it would signal that this "peace premium" has taken hold.

Why have institutions become so divided?

The gap between institutional forecasts for the coming year has never been wider. On one side, there are official energy forecasts that take a return to normal supply as their base scenario; one institution projects that the price of Brent crude could start at $105 per barrel on a quarterly basis and decline to $74 by the end of next year. Another major bank forecasts $105 for December, with an average of $88 for next year. In short, this camp believes that if peace is restored, oil prices will rapidly fall back to a level unburdened by fear.

On the other hand, there is a more cautious camp. A report from an international development bank outlines an alternative scenario in which, should the war drag on, the average price of Brent crude could rise to $105 next year. The same report, which anticipates a 32% increase in energy prices this year, notes that global commodity prices have already climbed by 23% and warns that the risk of a food crisis is looming. For this group, oil is not merely a price forecast, but a map of potential risks.

The gap between these projections exceeds $30 per year—a piece of information that could prove invaluable to you, especially given that no one knows when the "strait" (the bottleneck) might open up. These forecasts differ not because the analysts are incompetent, but because each has bet on a different war scenario. What you should be tracking is not the forecasts themselves, but rather which scenario begins to materialize: the progression of attacks, the topics emerging from negotiations, and the cartel’s capacity adjustments scheduled for November.

What is the lesson here for the individual investor?

This week, the oil market taught you one of its most expensive lessons: while the flow of news drives prices, physical reality eventually catches up. On Monday, prices collapsed before a single additional barrel had even entered the market; yet, by Friday, when news broke that a tanker had been struck, those same prices attempted to rebound. An investor who adjusts their position size based on the latest news amidst these fluctuations is, in reality, making decisions driven by emotion rather than the news itself. The true lesson this week is that, when it comes to geopolitically sensitive assets, the direction can shift in a matter of minutes—triggered by a single signature or a single attack.

A second lesson is the need to interpret the situation across two distinct layers: the drop in oil prices below $100 does not mean the supply issue has been resolved; it merely means the market is pricing in the *possibility* of a resolution. Production cuts remain at record levels, the cartel is holding back, and the strait remains effectively closed. At the same time, one could view this as a buying opportunity—if a peace scenario fails to materialize, the risk premium that has evaporated could easily return. In this market, holding both perspectives is not a sign of weakness, but rather of maturity.

The practical framework for you is this: the next two weeks are packed with data that will clarify this equation—Tuesday’s inflation figures, the cartel’s capacity revisions, the summit on November 29th, and, above all, the flow of news coming from the strait. The price of taking a position in oil is having to contend with the rapid pace of news; if you are unwilling to pay that price, your only viable approach is to observe from the sidelines and map out your scenarios in advance.

This content is for informational purposes only and does not constitute investment advice.

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