OCBC strategists Sim Moh Siong and Christopher Wong lifted their end-2026 Brent forecast to USD 80/bbl from USD 75/bbl, citing Middle East supply disruptions that are lasting longer than expected. Brent has traded above USD 90/bbl as US–Iran tensions intensified, including strikes exchanged for the first time in roughly a month, while concerns have resurfaced over shipping through the Strait of Hormuz and talks on reopening the route remain stalled more than five months into the conflict.
Market conditions are being shaped by tightening physical balances. The strategists pointed to falling inventories, rising transport costs and emerging diesel shortages, arguing that the market has adapted to crude supply shocks mainly by running down buffers. In their assessment, diesel rather than crude has become the binding constraint, keeping geopolitical risk priced into the complex.
Positioning For Elevated Energy Market Risk
As we navigate the opening weeks of September 2026, derivative traders should position for sustained upward pressure on energy benchmarks, particularly Brent crude. With global crude inventories falling below their five-year averages and the Strait of Hormuz facing ongoing shipping bottlenecks, we recommend focusing on long call options for Brent to hedge against sudden geopolitical spikes. Recent data shows that global oil demand is projected to reach a record 103 million barrels per day this year, leaving the market with thin buffers to absorb any further Middle East supply shocks.
Refined Product Premiums And Volatility Strategies
We believe the most lucrative opportunities lie not in crude itself, but in the refined products space, specifically diesel. Because refinery capacity remains tight and transport costs are soaring, the gasoil crack spread—the price difference between crude oil and refined diesel—is set to widen significantly. Derivative traders should consider entering long positions on ICE Gasoil futures or utilizing calendar spreads to capture the premium of near-term tightness.
Furthermore, implied volatility in the oil options market has climbed past historical averages of 25% due to stalled diplomatic negotiations in the Middle East. To exploit this high-volatility environment without taking on excessive directional risk, we suggest employing option strategies like bull call spreads or iron condors. This approach allows us to capitalize on elevated premiums while protecting capital from sharp, unexpected swings in the physical market.
