Don't mistake Mideast oil rebound for normality

Key Points:

• Crude oil prices remain near five-month highs despite Middle East crude exports surpassing pre-war levels, indicating investor concerns about potential regional escalation amid ongoing Iranian attacks on tankers in the Strait of Hormuz.
• Middle East oil exports averaged 17.3 million barrels per day in October, up from 16.4 million bpd in September, with increased flows through the Strait of Hormuz largely facilitated by US-protected ship convoys along the Omani coast.
• Despite higher export volumes, tanker shipping costs and insurance premiums have surged, with tanker rates around $1.4 million per day and insurance costs rising to 10% of cargo value, reflecting the elevated risks in the region.
• The oil market shows signs of adaptation to the “new abnormal,” with large crude volumes moving through complex logistics and security arrangements, but Brent crude prices have risen to about $110 a barrel, underscoring fears over future supply disruptions.
• Heightened geopolitical tensions ahead of Israel’s and US midterm elections, along with limited prospects for diplomatic breakthroughs, contribute to market uncertainty and increased trading activity as participants hedge against further price volatility.