23rd September 2026
At first sight, the recent fall in the oil price seems difficult to understand.
Russian oil refineries are being attacked, Middle Eastern oil supplies have been badly disrupted, the Strait of Hormuz remains far from normal and global inventories have been falling. Yet Brent crude has recently slipped back below $100 a barrel - $98.46 Brent as at 7.30am today.
So why isn't the oil price continuing to rise?
The answer is that the oil market is looking beyond today's headlines and, importantly, crude oil is not the same thing as diesel or heating oil.
On Tuesday, Brent fell below $100 for the first time since early September. On Wednesday it was around $99 a barrel. One reason is that Saudi Arabia has begun restoring flows through its East-West pipeline to the Red Sea, providing another route for its crude exports. At the same time, hopes have emerged of a possible diplomatic solution involving the United States and Iran, including the possibility that the Strait of Hormuz could eventually reopen.
Oil traders do not wait until those things actually happen. Prices reflect what the market thinks is likely to happen in the future.
If traders believe that more Gulf oil will reach the world market in the coming weeks, some of the "shortage premium" built into the crude price can disappear quite quickly.
There is another important factor. High energy prices themselves reduce demand. The International Energy Agency expects world oil demand to fall by 2.5 million barrels a day during 2026. It also estimates that global oil inventories fell by another 95 million barrels in August, taking the cumulative reduction since February to 507 million barrels.
That creates a strange-looking market. Physical supplies are under considerable pressure, but consumers are responding by using less oil. The reduction in demand helps prevent crude prices from rising even further.
Then there is the part of the story which matters particularly to motorists and households using heating oil.
The diesel market is considerably tighter than the crude oil market.
The IEA says global seaborne diesel and gasoil exports averaged 4.7 million barrels a day during the first eight months of 2026, down 10% from a year earlier. Russia's refinery problems are making the situation worse. Russian refinery throughput fell to about 3.8 million barrels a day in June, roughly 30% below the previous year, while diesel production was estimated to be nearly 30% lower.
The attacks on Russian refineries therefore matter even if they do not remove the same quantity of crude oil from the world market.
A refinery takes crude oil and turns it into products such as diesel, petrol, jet fuel and heating-oil components. If refinery capacity is lost, there can be plenty of crude available while supplies of particular fuels become increasingly scarce.
That is already showing up in the price difference between crude and diesel. The IEA says diesel markets have become particularly tight and that refinery margins have reached exceptionally high levels as refiners struggle to meet demand.
For people in Caithness, this distinction is important.
A falling Brent crude price does not necessarily mean that the next delivery of heating oil will suddenly become much cheaper. The price paid locally also depends on refining costs, availability of diesel and heating-oil products, transport, the pound against the dollar and competition between suppliers.
It is therefore quite possible to have a falling crude-oil price while diesel and heating oil remain stubbornly expensive.
The recent fall in crude should certainly be welcomed by consumers, but it would be premature to regard it as the end of the energy squeeze.
The market appears to be saying that the worst-case shortage of crude may be becoming less likely.
The refined-fuel market is telling a rather different story.