Brent is at US$ 90 and looks poised to test higher levels. The immediate factor that is adding to the volatility is the evolving war situation in the Middle East. It looks like, other states in the region may also gradually be drawn into the conflict if it gets prolonged. More than a third of the global oil trade passes through Hormuz Straights through ships and war-like situations existing in the region could disrupt the traffic. Earlier on a few occasions even Iran had threatened that they would disrupt the traffic at the time of renewed sanctions against them by the UN and the US. That is why a prolonged conflict could be a reason for worry. There are two theories that are discussed in market circles on the future direction of oil prices. The first one focusses on demand destruction, whereas the second one places its argument on the growth in demand expected from countries like India and China in the long run. On a closer examination of the two, it looks like the demand destruction factor may come to play in the short term whereas the secular growth in demand may come from the growth engines in the long run. The demand destruction thesis is based mainly on the fact that inflation has been high in all countries, and fuel prices have been the main contributor to the high prices. And high price is its own cure. One of the things pointed out in this connection is the fall in fuel consumption in the US during the last holiday season which has fallen drastically. Could be the result of restraint on consumption consequent to high prices. The International Energy Agency (IEA) reports states, “evidence of demand destruction is appearing with preliminary September data showing that US gasoline consumption fell to two-decade lows. Buoyant demand growth in China, India and Brazil, nevertheless underpins an increase of 2.30 mb/d to 101.90 mb/d in 2023, of which China accounts for 77%. Growth slows to 900 kb/d in 2024, as efficiency gains and a deteriorating economic climate weigh on oil use.” The IEA further states that the oil output rose by 270 kb/d in September to 101.60 mb/d, led by higher production from Nigeria and Kazakhstan. The contribution has come from non-OPEC+ countries, and this may continue to be so in the coming two years – global output may increase by 1.50 mb/d and 1.70 mb/d in 2023 and 2024, respectively. US and Iran are cited as the two sources of growth in oil output. The global oil inventories fell by 63.90 mb in August, led by a huge 102.30 mb draw in crude oil stocks. Oil prices shot up to US$ 95 after OPEC + retained its output cuts till the year-end. But it has eased a bit afterwards. The developments around the ongoing Middel East conflict will be a determining factor for crude prices in the coming months. The US crude oil inventories, that is, the SPRs at the multi-decadal low. The limited growth in output and supplies, and the rising prices in the face of a tight money policy resulting in slower economic growth may have some impact on overall demand.