Oil Market Report - July 2026

July 2026 brought a sharp reversal of June’s “reopening trade” on crude markets. Brent and WTI began the month near pre-war levels as U.S.-Iran diplomacy, improving tanker flows and another OPEC+ target increase encouraged traders to remove Gulf-war risk premium.

EXECUTIVE SUMMARY

July 2026 brought a sharp reversal of June’s “reopening trade” on crude markets. Brent and WTI began the month near pre-war levels as U.S.-Iran diplomacy, improving tanker flows and another OPEC+ target increase encouraged traders to remove Gulf-war risk premium. That bearish structure lasted only a few early sessions. From July 7 onward, the market progressively rebuilt geopolitical premium as the ceasefire fractured, Iranian-linked vessel attacks returned, the U.S. revoked authorization for Iranian crude sales, Washington prepared a full naval blockade of Iran’s coastline, and the conflict spilled more directly into the Red Sea and Bab el-Mandeb. The month’s final week then showed the same unstable binary that has dominated the crude markets since March: prices collapsed when U.S. strikes paused and diplomacy seemed possible, but rebounded violently when airstrikes resumed and tanker data again showed constrained flows. Overall, July was not a return to March-style panic, but it was a decisive rejection of late-June normalization. By July 30, futures had restored a large, though volatile, disruption premium. From the June 30 settlement to July 30, Brent front-month futures rose by $13.93/bbl to $86.88/bbl, providing a gain of 19.1%, while WTI advanced by $14.09/bbl to $83.59/bbl, up 20.3%. Average July settlements stood at $83.27/bbl for Brent and $78.90/bbl for WTI. Brent’s average premium over WTI was $4.90/bbl, widening materially from the compressed June average, with the close spread peaking at $8.50/bbl on July 23 as seaborne disruption risk again dominated inland U.S. crude pricing.

August 2026 should start as a volatile range-trading month with upside geopolitical risk but weaker medium-term fundamental gravity. The late-July technical setup is no longer bearish in the same way it was in late June: Brent closed July 30 at $86.88/bbl and WTI at $83.59/bbl, both back above their 20-day moving averages and roughly around or above their 50-day averages. Momentum has recovered, with 14-day RSI near 60 for Brent and 65 for WTI, while 14-day ATR remains very high at roughly $5.5/bbl and $4.7/bbl respectively. That combination argues against a calm August: the market has regained upward momentum, but the recovery is already stretched enough that fresh buying likely needs confirmation from shipping disruption rather than only rhetoric. The central case is Brent mostly in an $80-95/bbl range and WTI in a $76-90/bbl range. The immediate bullish catalyst is still maritime risk. On July 31, prices rose again as traders reassessed flows through Hormuz after two VLCCs exited the strait but traffic remained thin; Bab el-Mandeb also stayed in focus, and the conflict has disrupted two of the world’s most important energy chokepoints. Before the war, Hormuz carried about a fifth of global oil and LNG supplies, so even partial obstruction keeps a risk premium embedded in prompt crude. The bullish August case would require one of three milestones: another sharp drop in Hormuz tanker transits, a broader Red Sea/Bab el-Mandeb blockade, or fresh attacks on Gulf/Suez-linked infrastructure. In that scenario, Brent could retest $95/bbl quickly and then challenge the July high near $102/bbl; WTI could move back toward $90/bbl and then the $93.5/bbl July high. The market is also supported by the fact that a July analyst poll raised 2026 Brent and WTI forecasts to $85.22/bbl and $80.14/bbl, respectively, explicitly because Middle East shipping disruptions and Red Sea attacks continue to threaten flows. The bearish case is more fundamental and needs visible normalization. The IEA’s July report says global supply rebounded by 4.1 mbd in June to 98.8 mbd as Hormuz flows partially resumed, and Gulf exports rose by 6.5 mbd to 16.1 mbd, although that was still well below the pre-war 24 mbd average. It also expects global demand to decline by 1 mbd in 2026, despite a recovery from the May trough. The EIA similarly cut its 3Q26 Brent forecast to $74/bbl, arguing that rising supply and smaller inventory draws should keep downward pressure on crude.

June 2026 marked a partial but still incomplete global oil supply recovery after the acute March-May Gulf war shock. World liquids production rose to 97.5 mbd, increasing by 3.7 mbd from May, a 4.0% MoM rebound, according to the U.S. Energy Information Administration. That was the fastest monthly growth rate in more than 20 years, which broke the three-month downturn that had defined the core phase of the crisis. The level also moved to the highest point in four months, but this should not be mistaken for normalization: output was still 8.7 mbd lower than in June 2025, an 8.2% YoY decline, and the annual contraction extended to a fourth month. Compared with the five-year average for June, world production remained 4.0 mbd lower, or 4.0% below normal. The fundamental explanation is that June captured the first meaningful restart phase after the June 18 U.S.-Iran memorandum of understanding to reopen the Strait of Hormuz. The EIA said tanker traffic through the region increased after the agreement, while Strait-related crude shut-ins fell to 8.3 mbd in June from 11.2 mbd in May; however, that still left the system far from its pre-war operating level. The International Energy Agency drew a similar picture for the month, reporting that global oil supply rebounded by a sharp 4.1 mbd to 98.8 mbd in June, as a resumption of flows through the Strait of Hormuz underpinned a partial recovery in Gulf production. World output was nevertheless some 9.4 mbd below pre-war levels, with supply on track to decline by an average of 3.7 mbd to 102.6 mbd in 2026, contingent on a swift de-escalation of renewed hostilities. If transit volumes improve, oil supply will expand by 7.5 mbd next year, according to the agency.

OPEC crude production rebounded in June 2026, but the recovery was partial rather than a return to normal. On the ex-U.A.E. basis, total cartel’s output rose by 1.48 mbd from May to 18.2 mbd. This 8.8% MoM increase was the fastest monthly growth rate in recent decades and broke a three-month decline, confirming that June marked the first meaningful supply recovery after the March-May wartime collapse. Even so, the level was only the highest in three months because the starting point was exceptionally depressed. Compared with June 2025, production was still lower by 5.98 mbd, a 24.7% YoY contraction, extending the annual downtrend to four months; however, the rate of annual decline moderated to the slowest in three months, which is consistent with the beginning of a Gulf restart rather than a completed normalization. Against the 5-year average for June, output remained 5.41 mbd lower, representing a 22.9% deficit, so the group still operated far below normal seasonal supply. The Gulf situation remained the dominant driver: production began to recover after the interim easing of the Hormuz shock, but traffic and exports were still not back to pre-war conditions, and later renewed tensions showed that the June improvement was fragile rather than structural.

The July OPEC+ decision to raise production again was consistent with the group’s gradual unwind strategy, but it still looked more like a signal of intended normalization than a guarantee of near-term barrels. On 5 July, Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman agreed to implement another 188 kbd production adjustment from the additional voluntary cuts announced in April 2023, with implementation scheduled for August. The decision was framed around market stability, gradual return of voluntary adjustments, monthly monitoring, compensation for past overproduction and full flexibility to increase, pause or reverse the phase-out. The next review was set for 2 August. The rationale was understandable: June had shown that some Gulf production could restart, and OPEC+ wanted to preserve credibility around the unwind roadmap while reassuring consumers that it was not deliberately withholding supply. The consequence, however, remained conditional. Kuwait, Iraq and Saudi Arabia were still far below their 5-year averages in June, so additional quota room did not automatically mean deliverable supply. The decision therefore widened the distinction between formal targets and effective flows. If Gulf logistics continue to normalize, the increase can accelerate the recovery of physical supply; if shipping risks return, the adjustment remains largely theoretical.

Non-OPEC oil production rebound in June 2026 after the war-driven weakness of the spring, but the recovery was still uneven and heavily shaped by geography. Total supply averaged 76.2 mbd, rising by 1.8 mbd from May, or 2.4% MoM, the fastest monthly growth rate in 4 months and the second consecutive monthly increase. The level was also the highest in 4 months, indicating that the worst of the March-April dislocation had partly reversed. Still, the annual comparison remained negative: output was 562 kbd below June 2025, down 0.7% YoY, with the annual decline extending to 4 months, although the contraction was much milder than in May. Production stood 3.7 mbd above the five-year June average, a 5.1% premium, showing that the non-OPEC oil complex was still operating above its seasonal norm despite the war shock. The overall monthly increase in production was led by a large rebound in Africa & Middle East as Gulf flows resumed, while the Americas continued to expand from an already high base. Brazil, the U.S., the UAE and Qatar were the most important positive swing factors, with Kazakhstan adding smaller support. Europe was the clearest negative regional surprise because Norway’s decline was large enough to pull the whole region to a 21-month low. Asia-Pacific was almost flat, as China and India offset Malaysia’s sharp drop.

U.S. total oil output averaged 24.3 mbd in June 2026, increasing by 156 kbd from May, or +0.6% MoM. The aggregate advanced for a fifth consecutive month and reached the new highest level in history, which made June more than a simple continuation of the post-January recovery: it confirmed that U.S. liquids supply had moved decisively above the late-2025 and early-2026 range. The annual comparison was even stronger. Output rose by 1.33 mbd from June 2025, or +5.8% YoY, extending the positive annual sequence to 21 months and delivering the fastest growth rate in 17 months. Relative to the five-year average for June, total production was higher by 2.86 mbd, or +13.4%, showing that the U.S. liquids system remained far above its recent seasonal norm even as the global oil market moved from acute shortage toward partial normalization. The month-specific context was unusually important: on June 18, the United States and Iran signed a memorandum of understanding to end the conflict and reopen the Strait of Hormuz, significantly changing the forward-looking interpretation. June still reflected a tight war-affected market, but the month ended with a clearer path toward restored Middle Eastern flows, softer crude prices and less pressure on U.S. producers to force a rapid drilling-cycle acceleration.

U.S. shale oil production (three major deposits only) increased to 9.18 mbd in June 2026, according to Rystad Energy. The aggregate rose by 32 kbd from May, or +0.3% MoM, extending the sequential expansion to three months and lifting the total volume to the new highest level on records. The pace of monthly growth was still the slowest in three months, so June did not represent a sharp acceleration; rather, it confirmed a steady but measured recovery in the three core hubs. On a year-over-year basis, output was higher by 247 kbd, or +2.8% YoY, extending the annual growth trend to 62 months. Relative to the five-year average for June, three-major-hub shale production stood 1.11 mbd higher, or +13.8%, which confirms that the narrowed shale aggregate remained substantially above its historical seasonal base. The activity backdrop supported the idea that the U.S. shale oil supply response was beginning to build gradually, but not explosively. Reuters reported that U.S. energy firms added rigs for the eighth time in nine weeks by June 18, with total oil and gas rigs at 563 and oil rigs steady at 433; one week later, the rig count rose by 10 to 573, the largest weekly increase since June 2022, while oil rigs climbed to 440, their highest level since June 2025. That increase was directionally consistent with stronger price incentives and higher expected U.S. output, but it also confirmed the usual lag in shale: rigs respond before wells are completed, and production follows only after a delay.

Global oil consumption in June 2026 showed a partial recovery from the May trough, but the rebound should not be mistaken for normalization. Demand improved sequentially as Gulf flows started to recover and some delayed consumption reappeared, yet the annual comparison remained deeply negative. According to the U.S. Energy Information Administration, global consumption averaged 101.0 mbd in June, up by 1.6 mbd from May, a rise of 1.6% MoM that broke a three-month downward sequence and effectively marked the fastest monthly growth rate in four months. The level achieved was also the highest in three months, confirming that May was the local trough. The annual picture, however, remained severely negative: consumption was lower by 4.0 mbd than in June 2025, down 3.8% YoY, extending the annual downtrend to four months and representing the fastest annual rate of decline in 5.5 years. Relative to the June five-year average, global oil consumption was still 959 kbd lower, recording a 0.9% deficit. The International Energy Agency also reported that a recovery in world oil demand is underway in June, with consumption set to rise from its May low of 97.9 mbd in May (a decline of 5.3 mbd year-on-year) on seasonal trends and as pent-up demand is released in line with a rebound in product supplies. By October 2026, the IEA now expects global demand to be up by more than 8 mbd from the May low point, putting it above 2025 levels for the first time since February. Annual contractions will ease from 4.8 mbd in 2Q26 to 1.7 mbd in 3Q26, followed by a rise of 1.2 mbd in 4Q26, for an overall decline of 1 mbd this year. Forecast growth of 2 mbd in 2027 results in a two-year pace of expansion well below historical trends.

Global observed oil inventories rose for the first time in four months in June 2026, by 21 mb, according to the International Energy Agency, as an armada of tankers set sail for refining hubs further afield. Oil on water swelled by 117 mb, far outpacing continued drawdowns in onshore stocks of some 96 mb. Following a decline of 73 mb in May, total OECD oil stocks fell by a further 62 mb in June, of which an estimated 44 mb came from government stock releases. Non-OECD crude stocks eased by 37 mb in June, led by a 41 mb draw in China. Detailed IEA’s data on April 2026 showed it was the first full month when OECD oil inventories were shaped by the Gulf war rather than by ordinary refinery-seasonality dynamics, and the stock signal was severe. Total OECD oil inventories fell sharply, crude stocks collapsed to a multi-year low, and all major petroleum-product categories also drew. The draw from March was 15.02 mln tons, equivalent to a 3.2% MoM decline, which extended the downward sequence to two months and was the fastest monthly rate of contraction in 71 months. OECD total oil inventories fell to 455.76 mln tons in April 2026. The volume of stocks dropped to 455.76 mln tons, the lowest level in more than 10 years. The annual comparison also deteriorated abruptly: total inventories were 11.49 mln tons lower than in April 2025, a 2.5% YoY decline. That broke the upward annual trend that had lasted for eight months and delivered the fastest annual rate of decline in 26 months. Compared with the five-year average for April, OECD total oil inventories were 32.18 mln tons lower, a 6.6% deficit, further confirming that OECD inventories had become materially depleted.

U.S. total oil inventories fell to 1 525 mb in June 2026, deepening the liquidation phase that began in April and leaving the national stocks at their new multi-decade low. Stocks declined by 67.53 mb from May, equal to -4.2% MoM, extending the drawdown to a third consecutive month and marking the fastest monthly rate of decline in more than 15 years. The annual comparison also moved deeper into contraction: total inventories were 104.53 mb below June 2025, or -6.4% YoY, the fastest annual rate of decline in 39 months. Relative to the five-year June average, the aggregate stood 166.43 mb lower, representing a 9.8% deficit, which is a much more severe shortfall than in May and confirms that the U.S. oil-stock cushion was being drawn down at exceptional speed. Albeit June 2026 was another month of severe U.S. oil-stock depletion, the pattern began to evolve from the April-May shock phase. The SPR continued to fall aggressively and commercial crude moved into a pronounced seasonal deficit, pushing total stocks to their lowest level in more than 17 years. At the same time, refined products were no longer uniformly collapsing: gasoline remained tight and continued to draw, while jet fuel and distillates rebuilt from heavily depleted levels.

Cushing crude inventories fell to 19.67 mb in June 2026, drawing by 2.77 mb from May, or -12.4% MoM, and 1.06 mb below June 2025, or -5.1% YoY. That pushed the hub to its lowest level in 143 months and left it 12.20 mb below the five-year average for June, representing a deficit of 38.3%, while the draw extended the current decline to three consecutive months. June 2026 therefore marked a shift from severe tightness to outright operational vulnerability rather than just another routine stock draw. In June, U.S. refiners lifted crude runs to 95.3%-96.7% of capacity to fill supply gaps created by the Gulf war and the disruption of Hormuz flows. At the same time, the supply side into the Midwest also tightened, as heavy rains and a power outage at Cenovus disrupted Canadian oil-sands output, Trans Mountain ran full, and strong overseas demand for Canadian barrels reduced the flow of replacement crude into Cushing and nearby refineries. By late June, stocks had slipped to about 19 mb, below the 20 mb threshold that traders and analysts often treat as the minimum for normal operations, confirming that the June average was not merely low in historical terms but uncomfortably low in functional terms as well. June also exposed a new disconnect between physical tightness and outright price action: revived tanker movement through Hormuz and expectations of de-escalation briefly pushed WTI below $70 even as Cushing hit its lowest level since 2014, because SPR releases and relatively better supply on the Gulf Coast cushioned the broader U.S. market.

Global offshore oil inventories partially recovered in June 2026 after May’s forced liquidation phase, but the rebound was limited and still left the global offshore balance below normal for the month. Worldwide stockpiles rose to 84.69 mb, increasing by 5.59 mb from May, or +7.1% MoM, the fastest monthly growth rate in three months. Compared with June 2025, offshore inventories were 7.19 mb higher, up 9.3% YoY, extending the annual expansion to 12 months. Yet the seasonal comparison remained weak: the global level stood 2.39 mb below the 5-year average for June, representing a 2.7% deficit. The June pattern therefore differs sharply from March and April, when the dominant signal was trapped oil inside the Middle East Gulf. By June, the market had moved into a more complicated reopening phase: flows through Hormuz were rising from May’s lows, helped by ship-to-ship transfers in the Gulf of Oman, but the IEA still emphasized demining, damaged logistics, unresolved transit rules and political risk as constraints on a full recovery. The agency said Middle East flows had increased from a May low of 9.6 mbd to around 12 mbd in early June, while Atlantic Basin crude exports to East of Suez markets had risen by 3.5 mbd since the start of the war.

AC - Oil Market Report - Jul-2026.pdf

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