Key facts
- The oil market sentiment is shifting from oversupply fears to concerns about potential future tolls for passage through the Strait of Hormuz.
- OPEC's combined output increased significantly last month, and the U.S. has set a new oil production record.
- Energy market research organizations have differing short-term supply outlooks, with some predicting deficits and others a glut.
- European countries and some Gulf Arab officials are reportedly preparing for or anticipating toll payments for tankers transiting the Strait of Hormuz.
- The U.S. and Gulf states officially state that maritime laws do not permit such tolls.
The global oil market is experiencing a significant shift in sentiment, moving from concerns about a potential oversupply to discussions about future price implications from tolls on passage through the Strait of Hormuz. While OPEC's combined output increased by 3.3 million barrels daily last month to 19.43 million barrels daily, and the U.S. has set a new oil production record near 14 million barrels daily, analysts are divided on the market's immediate need for this surge.
Energy market research organizations are recalibrating their global supply outlooks. The IEA and Bloomberg's NEF have narrowed their predicted 2026 supply deficits to 900,000 b/d and 500,000 b/d, respectively, down from earlier predictions of a 2 million b/d shortfall. In contrast, the U.S. Energy Information Administration (EIA) does not expect a recovery of Hormuz passage to pre-war levels before early 2027, forecasting global oil inventories to fall by an average of 7.6 million b/d in the third quarter of 2026. Despite these short-term discrepancies, all forecasters anticipate a supply glut in 2027.
The monthly Reuters poll on oil price projections saw the 2026 Brent average fall to $84.5 per barrel, a $6 decrease from May, indicating market reactivity to geopolitical developments. Some analysts, like Natasha Kaneva of JP Morgan, argue that the current surge in oil supply is about to collide with a market that does not currently need it. Conversely, ING analysts anticipate improved crude buying ahead due to lower prices, suggesting that cheaper oil will drive higher demand. They note that despite recovering tanker flows, the U.S. continues to release crude from its strategic petroleum reserve, and the falling flat price and contango forward curve could encourage market buying.
Adding a layer of geopolitical complexity, some European countries and Gulf Arab state officials are reportedly preparing for or privately sharing the view that Iran and Oman may impose tolls on tankers transiting the Strait of Hormuz. The official stance from the U.S. and Gulf states is that such tolls would violate maritime laws and set a problematic precedent. The prospect of these tolls is a particular concern for EU oil buyers, who worry about potential price increases.
Currently, the focus appears to be on maintaining low prices. OPEC is increasing production, the U.S. aims to lower gasoline prices, and importing nations are refilling storage. Traders are advised to monitor U.S.-Iran relations for potential market volatility.