Oil pulls back Friday but on track for weekly gains near 10%

West Texas Intermediate crude surged past $100 a barrel on Thursday for the first time since May, capping a week of escalating hostilities in the Persian Gulf that has left global oil supply falling far faster than demand. WTI ↘ 0.65% peaked above $104 before retreating, while Brent crude hit roughly $108 intraday before pulling back. On Friday morning, both benchmarks eased — Brent trading near $104 and WTI around $99 — but remained on track for weekly gains of roughly 8% to 9%.CNBC+1

The rally reflects a market where the physical disruption from the Iran war continues to outpace even the steep demand destruction it has caused. The International Energy Agency, in its September Oil Market Report released Friday, now projects global oil supply will fall by 5.7 million barrels per day in 2026, while demand is expected to contract by 2.5 million b/d — both figures sharply worse than last month's estimates. The resulting deficit has drawn global observed inventories down by more than 400 million barrels since the war began in late February.tradingnews+3

Escalation Fuels the Rally

The price surge followed a week of intensifying strikes between the United States and Iran in and around the Strait of Hormuz. Iran's Revolutionary Guards claimed to have struck U.S. vessels and oil tankers in the Gulf, while the U.S. launched retaliatory strikes on Iranian targets near the strait. Iran-backed Houthi militants also attacked Saudi energy infrastructure, including the Jazan refinery, broadening the conflict beyond its two principal combatants. Crossings through Hormuz have plunged to single digits on some days, compared with more than 20 before the war.The National+2

The EIA's September Short-Term Energy Outlook, released Tuesday, forecast Brent to average around $90 in the second half of 2026, a figure already $15 below Thursday's peak — a gap the agency acknowledged could widen given continued volatility.tradingnews+1

China's Restocking Adds Pressure

A key new factor tightening the market is the return of Chinese crude buying. After slashing imports earlier in the war and drawing down strategic stockpiles to buffer global prices, Beijing has begun restocking depleted inventories. Chinese seaborne imports ticked up to 7.14 million barrels per day in August from 6.93 million in July, though they remained nearly 40% below pre-war levels, according to Reuters citing Kpler data. The rebound has driven up premiums for West African, Canadian, and Latin American crudes.cnbc+3

The shift matters because China's earlier import restraint was, by several accounts, a key factor preventing prices from staying at the $130 levels seen in April. With inventory buffers now at their thinnest since April 2025, the restocking cycle is arriving at the worst possible moment for consuming nations already facing constrained supply.energyintel+2

Caught Between War and Demand Destruction

The two institutions the market relies on for guidance remain sharply divided. OPEC still projects demand growth this year, while the IEA sees a contraction of 2.5 million b/d — a gap of roughly 3 million barrels per day. Both agencies converge on one point: a strong rebound in 2027, with the IEA forecasting demand growth of 2.7 million b/d and supply rebounding once Hormuz reopens.Demócrata+2

For now, the market remains hostage to the waterway. President Donald Trump said this week that oil prices likely would not come down until after the November midterm elections, framing Iran's strategy as an attempt to influence the vote. That timeline implies at least two more months of disruption with 8.3 million b/d of Gulf production shut in and dwindling inventory cushions — conditions that keep crude above $100 even as the global economy slows.tradingnews+1