TD Securities’ commodity strategy team expects Brent to stay elevated as the oil market remains tight and geopolitical risk around the Strait of Hormuz persists. The firm does not expect conditions to normalise before December 2026 and keeps its forecasts at the upper end of consensus, while pointing to continued pressure from low petroleum product inventories alongside firm demand.
TD estimates an annual global crude deficit of 1.6–2.0 million b/d in 2026, while 5–6 million b/d of production capacity remains offline. Against a current Brent level of $90/bbl, it expects prices to trade $5–10/bbl higher over the next three months, and it assigns a strong probability to a return to triple-digit levels.
Strategic Positioning for Brent Call Options and Volatility
With Brent crude currently hovering around $90 per barrel, we recommend derivative traders position for a substantial upward move over the coming weeks. We should favor buying call options, specifically targeting the $95 and $100 strike prices for November 2026 contracts. This strategy allows us to capture the high probability of a surge to triple digits, driven by a projected global supply deficit of up to 2 million barrels per day.
Geopolitical tensions near the Strait of Hormuz, a vital chokepoint through which roughly 20% of the world’s petroleum passes, are likely to trigger sudden price spikes. To exploit this risk, we suggest establishing long volatility positions, such as call calendars or simple straddles, before option premiums price in higher risk. Historical data from past maritime conflicts shows that implied volatility in energy options tends to overshoot rapidly when shipping lanes are actively threatened.
Opportunities in Refined Product and Crack Spread Trades
We also see a highly profitable opportunity in trading the refined product markets, where global diesel and gasoline inventories remain near five-year lows. Traders should consider entering long crack spreads, buying heating oil or RBOB gasoline futures while selling Brent futures. This trade is supported by recent refinery data showing utilization rates struggling to meet firm global demand, which will keep product premiums elevated.
