Oil prices have dropped significantly, with Brent crude falling below $72.48 a barrel—its pre-war closing price—marking its fourth consecutive session of decline [bloomberg.com]. This downturn is largely due to a surge in global oil supply, characterized by an influx of offers from the Middle East and Africa, a dramatic reversal from previous shortages [bloomberg.com]. This signals a clear end to the US-Iran conflict's immediate impact on oil markets, with tanker traffic through the Strait of Hormuz recovering to at least 75% of pre-war levels [barchart.com].
Beyond increased flows through the Strait of Hormuz, robust Russian crude exports are further contributing to the oversupply, with a four-week average of 4.13 million barrels per day through June 28, the highest since Russia's 2022 invasion of Ukraine. This increase in Russian exports is likely a result of damaged domestic refining capacity from Ukrainian drone attacks [barchart.com]. Additionally, progress in US-Iran peace talks, including positive discussions in Qatar regarding technical aspects, is easing geopolitical tensions and reducing the risk premium on oil [barchart.com].
Analysts are reacting to these developments by cutting their 2026 oil price forecasts for the first time since the Iran war began. Goldman Sachs Group Inc. expects a surplus of nearly $2 million barrels per day next year, even after accounting for strategic petroleum reserve restocking. Morgan Stanley has also issued warnings of a looming glut as flows through the strait return faster than anticipated, leading them to cut price forecasts for the second time in two weeks [financialpost.com]. The International Energy Agency (IEA) has also revised its global oil consumption forecast, anticipating a decline of -1.1 million barrels per day this year, a larger drop than its previous estimate of -420,000 barrels per day [barchart.com].
