Saudi Arabia's Sohar STS rerouting keeps Asian crude moving but leaves a 246 million-barrel inventory deficit unreplaced
Bearish consensus on easing Middle East supply disruptions underweights how far global inventories have fallen since the conflict began in late February.
ICE Brent front-month was at $103.25 a barrel on Wednesday (2026-09-23), down 0.28%, while NYMEX WTI front-month was at $92.44, off 0.29%, leaving a spread of more than $10 between the two benchmarks. Saudi Arabia has been offering additional crude loadings to Asian refiners through ship-to-ship transfers off Oman's Sohar port, bypassing ongoing disruption to its Red Sea export hub, according to Reuters citing people familiar with the matter.5
Those STS transfer offers drove Brent down $1.24 to $104.59 and WTI down $1.14 to $101.29 in early trade on Thursday (2026-09-10), as the market read the extra loadings as supply-positive. Earlier that week, prices had surged to about four-month highs after shipping industry sources flagged crude loading disruptions at the Red Sea hub.5 The market swung from supply-risk to supply-recovery within days. That compression has become the defining rhythm of this market since the conflict began in late February 2026.
The bearish consensus has built on that rhythm. Signal weight now runs 57% bearish, with bearish positioning outpacing bullish by a factor of more than three. The underlying assumption is that stranded Gulf cargoes will eventually reach market, Saudi operational adjustments will normalize volumes, and the Middle East supply disruption will prove temporary. Analysts at Fitch Ratings have argued as much, saying the initial price spike was primarily a logistical shock rather than a lasting loss of production capacity, and expecting the market to move into oversupply next year.5,4
But an STS operation off Sohar is not the same as restored Red Sea loadings. Ship-to-ship transfers add freight costs and extend delivery times to buyers in South Korea, Japan and India. Saudi Arabia may be keeping volumes moving; it has not yet restored the export route that triggered four-month highs when it was disrupted.5
The inventory deficit is harder to dismiss. Since the conflict began, observable global oil stocks fell by a cumulative 246 million barrels — a 129 million-barrel draw in March followed by a further 117 million-barrel decline in April, equivalent to a sustained net drain of roughly 3.9 million barrels per day, according to OGJ.3 That is a physical deficit, not a sentiment-driven one. Restored flow routes do not automatically rebuild depleted storage; they require sustained production above consumption for an extended period.
Fitch's surplus scenario may ultimately prove correct. But Kaveri More, Commodity Analyst at Choice Broking, was also calling for a surplus and lower Saudi official selling prices in late May (around 2026-05-29), when Brent had already fallen nearly 19% that month toward $92 per barrel.1 Prices then surged more than 8% on June 1 (2026-06-01), with Brent touching $97.79, when tensions re-escalated.2
US crude inventory data for the week ending September 7 (2026-09-07) showed a draw of only 640,000 barrels against a Reuters analyst poll consensus of 1.62 million barrels, EIA figures showed, a miss that reads as bearish on its face.5 But the number arrived during a period when Saudi Arabia was routing barrels through non-standard channels, which can shift the timing and reported destination of arriving cargoes and make weekly reads less reliable than usual.
Across the full arc since late February, Brent and WTI remain roughly 40% above their pre-conflict levels, LiveMint reported.2 The market absorbed a near-19% sell-off in May — the worst monthly decline since 2020 — a collapse below $80 on June 22 (2026-06-22) on supply-recovery optimism, and a subsequent recovery that has kept Brent above $100 through much of the summer.1,4 Vandana Bharti, Head of Commodity Research at SMC Global Securities, noted in late May that the sell-off reflected a sharp unwinding of geopolitical premiums, while still acknowledging that strong market fundamentals continued to support prices.1
What would put the bearish case on firmer footing: EIA data showing US crude inventories drawing consistently at or above analyst consensus over the coming weeks; independent confirmation that Saudi Red Sea loadings have returned to pre-disruption volumes rather than being rerouted via Sohar; and any evidence that the 246 million-barrel stock deficit is being replenished at a rate that would close it within a credible timeframe. Until one of those materialises, the physical inventory shortfall and the persistence of the Brent-WTI spread both argue against treating the current setup as a clean supply normalization.3,5,4