On Thursday (September 10) during the European session, Brent crude futures surged to $101.91 per barrel, just shy of the high reached on July 23. ING analysts Warren Paterson and Eva Mantey noted that Brent crude's first break above $100 per barrel since July was driven by ongoing geopolitical risks in the Persian Gulf and the lack of a credible path for de-escalation in the US-Iran situation. The bank emphasized the upside risk from potential disruptions to traffic in the Strait of Hormuz and pointed out that Asian oil purchases are crucial to the sustainability of the current rally. Their core assessment is that while geopolitical risk premiums are still being priced in, the continuation of the rally largely depends on the strength of follow-up buying from Asia.

Brent crude oil breaks through $100, risk premium continues to be priced in.

ING analysts stated, "ICE Brent crude broke through $100/barrel yesterday for the first time since July, and this momentum continued into this morning's trading. This move reflects the market's continued pricing in ongoing geopolitical risks, with no credible path for de-escalation in the Persian Gulf tensions. If anything has changed, current signals point to further escalation, solidifying the upward pressure." Iran has indicated it is prepared to escalate the conflict, while Trump has stated it could continue until after the midterm elections in early November. ING warns that the risk lies in escalation leading to a substantial disruption of traffic in the Strait of Hormuz. Oil flows have unexpectedly increased in recent weeks, but if continued escalation translates into another disruption of oil flows, the market could tighten more quickly.

Purchasing activity in Asia is key to the sustainability of the price increase.

ING specifically highlighted the supporting role of increased physical market activity in Asia in bullish sentiment, particularly in the North Sea market, where Brent crude futures performed even stronger. Asia helped rebalance the market by reducing crude oil imports for much of the conflict. While imports remain well below the same period last year, they have begun to recover from June lows; recent physical market activity suggests this trend may continue. ING explicitly stated: "Purchasing activity in Asia is crucial to the outlook and how much momentum this latest rally can sustain. It will largely determine whether this rally continues or fades."

API inventory data: Crude oil declined slightly, while gasoline saw a significant drop.

Overnight API data showed that U.S. crude oil inventories fell by 300,000 barrels over the past week. In terms of refined products, gasoline inventories decreased by 1.9 million barrels, while distillate fuel inventories increased by 2 million barrels. The more closely watched EIA inventory report will be released later today.

Summarize

Brent crude futures continued their upward momentum after breaking through $100/barrel. ING believes that geopolitical risk premiums are still being priced in, with the US-Iran situation lacking a path to de-escalation and even pointing to further escalation. Potential disruptions to traffic in the Strait of Hormuz are the biggest upside risk, while Asian crude oil purchasing activity is the key variable determining whether the rally can continue—physical market activity in Asia has shown signs of recovery, but imports remain far below the same period last year. API data shows a decline in crude oil and gasoline inventories, while distillate fuel inventories have increased. The EIA report will be the next focus of the day. Overall, the geopolitically supported rally is unlikely to reverse in the short term, but the strength of Asian buying will determine its sustainability. (Brent crude oil futures daily chart, source: EasyTrade) At 16:03 Beijing time, Brent crude oil futures were trading at $101.36 per barrel.