View: Cautiously Bullish
Target Price: $65/bbl
Building room for more longs?
The M1 Brent futures contract slid to its lowest level since early May 2025 on 10 Oct amid a long-awaited ceasefire between Israel and Hamas and a growing trade rift between Washington and Beijing. However, prices gapped up 13 Oct’s open, and we expect prices to see some support this week and end the week around $65/bbl. However, we caution that the $66/bbl handle (coinciding with the base of the triangle Brent moved within for most of July-September 2025) will be challenging to break above.
Still, three drivers we recommend monitoring this week include:
- Developments on the US-China trade war
- Continued attacks on Russian oil infrastructure
- Risk-off sentiment in Brent opening room for new length
Driver 1: US-China Trade Tensions, Again
Brent’s 10 Oct sell-off followed renewed US-China trade tensions, after Beijing launched an antitrust probe into Qualcomm, imposed new port fees on US-owned vessels, and restricted exports of certain battery components. Although China’s actions were in response to the US Bureau of Industry and Security extending export restrictions on subsidiaries that are owned 50% or more by entities under US export controls and sanctions lists, the Trump administration responded with 100% tariffs on Chinese exports to the US and new export controls on “all critical software” effective 1 Nov. Over the weekend, conciliatory comments from both sides sparked “TACO” speculation, lifting S&P 500 mini futures +1.46% d/d, though still below pre–10 Oct levels. Brent futures also rebounded, but traders await clearer signs of easing tensions.
Driver 2: Continued Attacks on Russian Oil Infrastructure
Ukrainian drones struck the Bashneft Novoil Refinery in occupied Bashkortostan (340 kb/d capacity), the third such attack on the region in a month. On 11 Oct, Ukrainian Commander-in-Chief Oleksandr Syrskyi said Russia’s oil processing capacity has fallen 21% due to drone strikes, tightening Russian supply and supporting oil prices. Following the Israel-Hamas agreement last week, attention will also turn to President Trump’s potential ceasefire plans for Russia and Ukraine. While a Russo-Ukrainian ceasefire could weigh on prices, possible U.S. sanctions on buyers of Russian oil as leverage may provide short-term price support.
Driver 3: Open interest in Brent Futures
Finally, exchange-traded open interest in Brent futures was highly oversaturated at the end of September, with OI in the Dec’25 Brent futures climbing above its 5-year maximum, before we saw a slew of de-risking in the first two weeks of October. Although overall Brent futures OI sits 27% above the 5-year average at 2,904 mb in the week ending 07 Oct, OI has declined from ~2,990 mb in the week ending 23 Sep. Coupling this with the w/w declines in net long positioning in Brent futures in the weeks ending 30 Sep and 07 Oct, we see further room for fresh length at these low prices.
