# Brent Rebounds to $111.70 as Volatility Hits 60 and Curve Screams Scarcity 25 October 2026 ยท OILAV Canonical URL: https://oilav.com/brief/2026-10-25 **Brent is at $111.70 (+2.67%) with OVX at 60 and a 20% backwardation to Oct 2027, so dips toward $106 are buys while Hormuz stays shut.** ## Key levels - Brent: support 105.95, resistance 114.67 - WTI: support 95.25, resistance 103.92 ## Price Action & Technicals > Buy dips toward $106 Brent, and treat a close above $114.67 as the trigger for the $120 test. **Brent closed at $111.70, up 2.67% on the session and 1.62% over five days.** That is still **$2.97 below the 5-day high of $114.67**. Yesterday's brief had headline prints at $116-117, but the settlement feed does not confirm them, so treat $114.67 as the line to beat. The 5-day range of $105.95-$114.67 is **$8.72 wide**, and the market is trading it violently. **WTI at $103.27 (+1.45%) gained 4.56% in five days and is now within $0.65 of its $103.92 high.** WTI is outperforming Brent on the week, but the **Brent-WTI spread is still $8.43**, extraordinarily wide. Spot is also strong: **EIA Brent spot of $115.22 sits $3.52 over the futures print** (WTI spot $107.89 vs $103.27 futures), so physical is leading paper. **OVX jumped 18.29% to 60.02, a 5-day high zone (peak 60.63).** At that level the market is pricing roughly **3.8% daily moves, about $4.20 a day on Brent**. Stops inside a $4 range are noise, not risk management. ## Supply & Inventories > Prompt tightness and a $97.78 distillate crack mean the pain is in diesel, and flat-price downside is limited while the curve stays inverted. **The curve says physical scarcity is acute and front-loaded.** Brent is flat from front to Jan 27 at **$111.70**, then drops to **$100.86 by Apr 27 and $89.11 by Oct 27 (-20.2%)**. WTI shows the same shape: $103.27, $100.94, $93.20, $82.69 (**-19.9%**). A flat front six months followed by a steep slide means the market is paying up for prompt barrels and betting on a resolution by next year. **Refined products are the tightest part of the complex.** The **distillate crack is $97.78/bbl** and the **3-2-1 crack is $51.34**, extreme by any historical standard. Gasoline is much weaker at a **$28.12 crack**. Heating oil fell 2.80% to **$4.7870/gal** on the session but holds a 0.93% five-day gain. Distillate tightness is the real stress point, and Asia is feeling it: **fuel oil is becoming Asia's next cost shock** as Middle East and Russian supplies stay disrupted. **Record tanker rates are choking US crude exports to Asia.** The Iran war has made voyages so inefficient that freight has erased the incentive to ship US barrels east. That keeps WTI landlocked relative to Brent and explains the **$8.43 spread**. No EIA stock-change figure was in today's package, so the weekly report is the next confirmation of US balances. ## Geopolitics & Disruptions > Two maritime theaters, Hormuz and the Black Sea, keep the geopolitical premium intact into early November. **The Hormuz disruption is now prolonged enough to reshape investment planning.** SPE ATCE 2026 panels put the crisis at the center of the energy security debate. That is a structural bid under the back of the curve, though the **-20% slide to Oct 2027** still prices a eventual normalization. **The Black Sea is escalating.** A drone strike sank a cargo ship off Romania's coast (**1 killed, 3 missing**), and President Nicusor Dan blamed Russia for attacking NATO's eastern flank. That adds a second maritime risk premium on top of the Gulf. Separately, an **offshore oil leak has shut all Ras Al Khaimah beaches** in the UAE, another sign of stress in Gulf infrastructure. **Yesterday's thesis of Saudi attacks and a possible early-November Iran strike is not confirmed in today's headlines, but nothing contradicts it.** With OVX at 60, the market is still pricing the tail. Do not fade the risk premium into the first week of November. ## Positioning & Flows > Positioning has room to run, but falling open interest means any selloff will be fast and mechanical. **Managed money is long but not crowded.** The CFTC report dated Oct 20 shows **money manager longs of 178,884 vs shorts of 76,978**, a **net speculative position of 101,906** and a long-to-short ratio of about 2.3x. That leaves room to add on a breakout. **Open interest fell 73,685 contracts to 2,502,206.** Falling OI in a rising market signals shorts covering and weak hands leaving, not fresh leverage, and it makes the rally more fragile on air-pockets. The data is **five days stale**, and Brent has moved sharply since, so assume net length has grown. **Brent futures volume of 162,353 vs WTI's 1,241,202** shows the liquidity is concentrated in WTI. With the 18% OVX jump, expect margin-driven forced selling on any sharp reversal. ## Macro & Cross-Asset > No supply response arrives before 2027, so macro cannot cap prices on a 6-12 week horizon. **Natural gas rose 2.94% to $3.050/MMBtu** with a 5-day range of $2.708-$3.141, so US gas is not following the crude premium. That limits the cost shock for US industry compared with Europe and Asia, where fuel costs are rising. **Gasoline RBOB at $3.1284/gal (+0.36%) is the laggard.** A $28.12 crack against a $97.78 distillate crack shows demand destruction is hitting gasoline while diesel and bunker fuel stay tight. Germany said it will seek to stem refinery closures, a sign that Europe sees refining capacity as strategic. **Supply-side responses are slow.** Santos reported record Q3 output of **26.3 MMboe**, while Pikka is heading for a curtailment to about **70,000 bpd**. SLB reported its **Middle East business up 13%**. Strathcona's 250,000 bpd Prince Rupert terminal is a two-year story at best. No new barrels arrive before 2027. ## What to watch - Monday open: whether Brent holds above $111.70 and challenges the $114.67 5-day high - EIA weekly petroleum status report (Wednesday, 10:30 ET) for the US crude stock change, missing from today's package - OVX: a move through the 60.63 high would signal further volatility expansion, while a drop below 50.41 would signal calm - Next CFTC report (Friday): does net spec climb above 101,906 from the Oct 20 reading? - Hormuz and Black Sea headlines through the first week of November, the window flagged for a possible Iran strike ## Risks to the view - Hormuz or Gulf infrastructure escalation pushes Brent to $120 or higher (possible) - Diplomatic breakthrough or Hormuz reopening collapses the premium back toward $100 (possible) - Demand destruction from record freight and the $97.78 distillate crack triggers a sharp downturn in refined demand and a margin-driven liquidation (likely) ## Outlook Brent is biased higher: a close above $114.67 opens $120 within one to two weeks, while $105.95 is the line where the bull case needs reassessment. Expect $4-plus daily swings with OVX at 60. The curve will stay inverted until Hormuz traffic normalizes, so buy dips and avoid selling spikes. --- Cite as: OILAV (2026-10-25). "Brent Rebounds to $111.70 as Volatility Hits 60 and Curve Screams Scarcity". Daily oil market brief. https://oilav.com/brief/2026-10-25