Oil prices declined during the week as optimism grew around a US-Iran memorandum of understanding aimed at halting Middle East tensions. The agreement includes provisions to halt fighting, reopen the Strait of Hormuz, and temporarily lift sanctions on Iranian oil exports, leading to increased tanker traffic and improved supply sentiment. Prices fell to their lowest since March, reflecting confidence in negotiations despite ongoing disagreements - particularly around nuclear inspections and financial arrangements - which highlight underlying fragility in the deal.
On the supply side, increased vessel movement through Hormuz signals a partial recovery in flows, though volumes remain below pre-war levels due to mines, routing constraints, and operational uncertainty. The global supply outlook remains constrained, with the IEA projecting a sharp drop in 2026 production followed by a strong rebound in 2027. While sanctions relief for Iran may temporarily boost exports, its long-term impact remains unclear.
Demand projections from OPEC are notably bullish. The organization expects continued growth through 2030 and beyond, arguing that rising consumption in emerging markets and slower energy transition progress will outweigh efficiency gains and renewable adoption. Policy shifts favouring energy security and weaker support for electric vehicles are also expected to sustain oil demand growth.
In downstream markets, Ukrainian strikes on Russian oil infrastructure have intensified, damaging refineries and logistics facilities. These attacks are disrupting exports, causing domestic fuel shortages, and pushing up prices within Russia. Continued strikes could further constrain global supply and add volatility to already fragile markets.