US crude fell back below US$100 a barrel on Monday. West Texas Intermediate (WTI) dropped 2.09 per cent to US$99.29, after its highest close in a month.

On Friday, President Donald Trump waived penalties under the Graham Act, a Russia sanctions law, signalling more Russian fuel for world markets. Even so, WTI is still up almost 73 per cent this year, and the strain shows in inflation and interest rates.

America's benchmark

WTI is the main US crude benchmark, a light, sweet grade that refiners easily turn into petrol and diesel. It trades on Nymex and is priced at Cushing, Oklahoma. Because it is an inland US grade, it responds closely to American stock levels.

A war-driven rally, cushioned at home

The 2026 rally began in the Gulf. According to the US Energy Information Administration (EIA), military action on 28 February led to a de facto closure of the Strait of Hormuz. Iraq, Saudi Arabia and the UAE then cut or shut in output.

WTI rose less than Brent. The EIA said strong US inventories and planned releases from the Strategic Petroleum Reserve (SPR) held it back. The US committed 172 million barrels to an emergency release coordinated by the International Energy Agency (IEA).

That cushion is thinning. The SPR fell to 283 million barrels in early October, its lowest since 1982, according to Energy Department data reported by Reuters.

Inventories tighten, shale responds slowly

Commercial stocks are tightening too. US crude inventories fell 8.6 million barrels in the week to 9 October, to 415.6 million barrels, EIA data showed. It was the largest draw since February and left stocks 3 per cent below the five-year average.

Distillate stocks were 12 per cent below the five-year average, which Saxo Bank's Ole Hansen called a record seasonal low.

Shale has answered the rally only cautiously. Diamondback Energy raised its output guidance and added rigs in May. But Baker Hughes counted 459 US oil rigs in mid-October, three fewer than a week earlier.

The EIA expects US output to average 13.87 million barrels a day this year and 14.3 million in 2027.

Why prices fell today

WTI settled at US$101.41 on Friday, its highest close since 17 September, after Iranian attacks on tankers cut Hormuz traffic.

The Russia waiver changed the mood. It suspends tariffs of up to 100 per cent on the largest buyers of Russian crude and gas. They were due to apply a day later.

Supply risks remain. Iran's Revolutionary Guards said two tankers hit mines in the strait over the weekend. Ukrainian drones also set fires at an oil export terminal in St Petersburg.

Inflation and central banks

High crude has pushed up inflation and interest rates across rich economies. In the US, AAA put regular petrol at US$4.30 a gallon on 18 October. CBS News reported it was US$2.98 before the Iran war.

US consumer prices rose 3.7 per cent in the year to September, with the petrol index up 34.2 per cent. The Federal Reserve raised rates in September for the first time since 2023, to 3.75–4 per cent. Capital Economics puts the odds of another rise at the 27–28 October meeting at 50 per cent.

Others have moved too. The European Central Bank raised its deposit rate to 2.5 per cent on 10 September, its second rise in three months. Euro-area energy inflation had jumped to 14.3 per cent in August.

The EIA's October outlook sees WTI averaging US$97 a barrel in the fourth quarter and US$79.74 in 2027. Goldman Sachs projects US$81 in December and an average of US$73 next year.

What it means for Australia

In Australia, oil's moves reach investors through interest rates, the currency and local producers. The Reserve Bank of Australia lifted its cash rate to 4.60 per cent in late September, its highest since 2011. It cited higher global energy prices.

Metric

Value

Price (USD/Bbl)

99.289

Daily change

−2.121 (−2.09%)

Weekly change

+5.92%

Monthly change

+7.49%

Year to date

+72.92%

Year on year

+74.13%

Price date

19 October 2026