Oil's long view darkens as Iran war refuses to end
USO•Brent futures for December 2027 have risen more than 13% since early September to $86 a barrel, while traders price in elevated oil costs through 2028 as the Iran war disrupts supply and shipping. Diesel futures have also surged, with December 2027 contracts above $1,000 per ton.
1. Long-term oil prices rise
Brent futures for delivery in December 2027 have climbed more than 13% since the start of September to $86 a barrel, a contract record. December 2026 contracts are up around 12%. The forward curve reflects market participants' willingness to lock in elevated prices, though it is not a price forecast.
2. Supply risks persist
The International Energy Agency projects global oil supply will rise to 108.3 million barrels per day in 2027 from 100.7 million this year, while demand is forecast to increase to 104.4 million barrels per day from 102.4 million. But attacks on vessels and threats to disrupt the Strait of Hormuz have kept supply concerns elevated. Security, freight, insurance and military protection now account for nearly a third of the cost of moving a barrel out of the region, compared with 3% before the war.
3. Diesel market tightens
European diesel futures reached a record $1,480 per metric ton in mid-September, and December 2027 contracts climbed above $1,000 this week, compared with $644 before the war. The article says the diesel repricing may be more consequential than the rise in crude, as sustained high fuel costs can feed into transportation, manufacturing and food costs. US inflation was 3.7% in September, almost twice the Federal Reserve's 2% target.
