Oil markets are increasingly pricing in a lasting de-escalation of Middle East tensions. Oil prices have fallen for four consecutive weeks, with Brent around USD 73 per barrel and WTI about USD 69 per barrel, close to pre-war levels. Increased tanker traffic through the Strait of Hormuz, particularly from Saudi Arabia and the UAE, has eased fears of supply shortages. However, risks remain: Iran has discouraged vessel movements, several tankers have been attacked, and instability persists in both the Strait of Hormuz and the Red Sea. Despite these incidents, market reactions have been relatively muted compared with earlier in the year, reflecting growing confidence that oil flows will normalize. Citi even forecasts Brent could fall to around USD 60 per barrel by the end of 2026.
On the supply side, OPEC+ announced another production-target increase of 188,000 bpd for August, continuing its effort to reverse cuts introduced in 2023. Although actual output remains constrained by regional disruptions and logistics challenges, the group expects to restore significant volumes later this year.
Demand analysis suggests supply growth will substantially exceed consumption growth over the next few years. Analysts are watching for stronger demand from China, but the IEA expects global supply to rise by between 8 Bn bpd and 10 Bn bpd by 2027 while demand grows by only about 2 Mn bpd. Goldman Sachs notes that stockpile rebuilding could support consumption, yet it still expects a global surplus of between 2 Mn bpd and 3 Mn bpd. This points to downward pressure on prices.
In downstream markets, regulators are increasingly targeting alleged fuel-price manipulation. South Korea has charged major refiners with collusion, while U.S. authorities are intensifying scrutiny of potential price gouging as retail fuel prices remain elevated despite falling crude prices.