The Barrel Returns, but Not for Europe

The macro point

The circulated figure is misleading. Crude oil exports from the Middle East rebounded to 12.8 million barrels per day in September, presented as the highest since February; it's actually six million less than in February. Hormuz carries 7.4 million barrels compared to about 15 million in 2025, and the world has drawn 507 million barrels from its stocks since the beginning of the conflict.

This rebound, above all, doesn't pass through Europe. Saudi Arabia increased its exports to 5.4 million barrels per day in September from 2.4 in August, but via Ras Tanura and the Gulf, thus toward Asia. Its pipeline to the Red Sea, hit on September 10 and 11, only resumed on September 23 at a reduced flow. Aramco has warned at least two European refiners that they would receive no crude in October.

Europe is therefore buying its replacement at a high price. The Norwegian Johan Sverdrup traded up to $35 above the dated Brent, compared to 60 cents on September 8. The bottleneck is less in crude than in refined products: diesel exports from the Gulf have dropped to a quarter of their pre-war level, pushing European refining margins on diesel above $85 per barrel, a record.

The French consumer pays the price. Diesel reached €2.399 per liter on September 25, above the March 2022 record of €2.1407, and one in ten stations was missing at least one fuel. We see a terms-of-trade shock directed against Europe, lasting as long as Gulf barrels go to Asia. Paris responded with €450 million in targeted aid, without a pump discount.

Technical point

The Canadian dollar should have gained from this crisis, since Canada exports oil. It gained nothing: the EUR/CAD finished Friday at 1.6111. Two reasons explain this: the Bank of Canada maintains its rate at 2.25%, and Alberta's crude flows through pipelines at a discounted price. A European shortage does not benefit a currency that sells its oil by pipe to its neighbor.

The yen presents a unique problem. Japan and the United States intervened together in August to support it, and Tokyo reiterated on September 24 that this mechanism still holds. A company that must buy yen faces two risks: the market and a political decision that could cause the currency to soar. In this case, an option protects better than a futures contract because it leaves the choice not to use it. The EUR/JPY finished Friday at 179.17.

The level remains. The EUR/USD closed at 1.1391, down 0.81%, its third week of decline. The 1.1323 to 1.1353 zone, a 38.2% retracement of the rise from 1.0176, would open 1.0904. We do not anticipate it: in the short term, we see the pair between 1.13 and 1.15. Real rates explain the other two pairs: Switzerland, with 0.8% inflation and a zero rate, is at the eurozone level, and the EUR/CHF is stable at 0.9438; the pound benefits from a UK rate of 3.75% for 3.1% inflation, at 0.8596.

The supports and resistances displayed below respectively indicate the low and high points within which the prices should evolve during the week.

Announcements to follow

Three key meetings are scheduled this week. On Wednesday, the U.S. PCE index for August, expected to rise by 0.4% for the month, will indicate if energy is driving the American basket. On Friday, the flash inflation of September in the eurozone and U.S. employment appear in the same session. The first will measure what the energy bill has already cost, and the ECB will not make a statement before the end of October.

Below are the publications and events likely to have a significant impact on exchange rate developments.

The information presented in this publication is provided for informational purposes only and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not be considered as an encouragement to engage in any investment.