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Developments over the week:

* Brent climbed towards USD 110/b, while WTI approached USD 98/b, following attacks on Saudi Arabia’s energy infrastructure and airports. A drone strike targeted Saudi Aramco’s 1 mbd Shaybah oilfield, although production remained unaffected, while another attack targeted Dammam airport. The US subsequently ordered the departure of non-essential embassy personnel and their families. Meanwhile, Gulf crude exports, including Kuwait’s, have recovered towards pre-conflict levels despite escalating hostilities in the Strait of Hormuz, although diesel and jet fuel shipments remain constrained by tanker shortages.

* Global oil inventories, including strategic reserves, declined nearly 15% between March and September to 5.83 Bn barrels, with crude stocks falling by 821 Mn barrels to 4.1 Bn barrels.

* China drew down crude inventories for the fourth time in five months in September, with refinery throughput exceeding combined crude imports and domestic production by approximately 530 kbd. Meanwhile, crude imports are set to recover to their highest level since March in October, likely reversing the recent inventory drawdown trend and potentially supporting stock replenishment.

In our opinion:

* We believe declining OECD inventories, widening Brent-WTI spreads and elevated tanker freight rates reflect persistent tightness in global crude markets. Reduced inventory buffers and constrained shipping capacity have weakened the market's ability to absorb additional supply disruptions.

* China's anticipated recovery in crude imports could intensify competition for available cargoes, particularly if incremental purchases are directed towards replenishing depleted inventories rather than supporting higher refinery throughput. This could limit the pace of global inventory rebuilding despite recovering Gulf exports.

* Limited inventory buffers and persistent logistical bottlenecks have increased crude oil prices' sensitivity to incremental supply disruptions. We expect geopolitical uncertainty to sustain elevated near-term pricing premiums, while further escalation in the Middle East could trigger a disproportionate upward price response.

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