Oil Market Report - June 2026

June 2026 became the month when crude markets finally stopped trading the Gulf war as a persistent shortage shock and began pricing a fragile, uneven but increasingly credible reopening of the Middle Eastern supply system.

EXECUTIVE SUMMARY

June 2026 became the month when crude markets finally stopped trading the Gulf war as a persistent shortage shock and began pricing a fragile, uneven but increasingly credible reopening of the Middle Eastern supply system. Brent and WTI both started June with a sharp relief-rally reversal, as renewed U.S.-Iran frictions and blockade threats briefly pushed the benchmarks back toward the high-$90s, but the dominant direction then turned decisively bearish. The key shift was not that physical constraints disappeared: Hormuz traffic, Asian imports and Gulf exports remained far below pre-war norms. Rather, crude futures moved ahead of the physical data, discounting the U.S.-Iran memorandum, sanctions relief, military-escorted tanker exits and expectations that stranded barrels would return to market. By late June, Brent was back near pre-war levels and WTI had slipped below $70/bbl intraday, even though shipping risks and product tightness had not vanished. From the May close to June 29, Brent front-month futures fell by $17.21/bbl to $73.91/bbl, a decline of 18.9%, while WTI dropped by $16.61/bbl to $70.75/bbl, down 19.0%. The month’s highest intraday levels were printed early, on June 3, when Brent reached $98.99/bbl and WTI touched $97.00/bbl. The lows came late in the month: Brent traded down to $71.93/bbl on June 26, while WTI reached $68.56/bbl the same day. Average June settlements were $85.05/bbl for Brent and $82.36/bbl for WTI, leaving Brent at an average premium of $2.91/bbl.

July 2026 opens with crude prices both technically damaged and fundamentally “unsafe”. Brent ended June with crude prices much closer to late-February pre-war levels than to the March-April crisis plateau. The chart setup has therefore turned bearish: the market has broken below the main moving-average cluster, the June highs near $99/bbl Brent and $97/bbl WTI are now distant resistance, and the immediate downside reference points are the late-June lows around $72/bbl Brent and $69/bbl WTI. A sustained break below those levels would confirm that the peace trade has become a trend rather than a retracement. The base case for July is a lower, volatile range, with Brent mostly in the $68-80/bbl corridor and WTI around $65-77/bbl. The main reason is that the market is increasingly discounting an eventual return of Gulf barrels: recent prices fell as investors focused on possible U.S.-Iran talks in Doha, while Middle East producers continued loading oil and LNG despite renewed ship attacks and U.S.-Iran strikes. Traffic through Hormuz also reached the highest level since the conflict began, although real normalization is still not visible. Fundamentally, the bearish argument is no longer just geopolitical. The IEA now expects global oil demand to decline by 1.1 mbd in 2026, while refinery crude throughputs are forecast to contract by 2 mbd this year. That means high prices and disrupted product availability have already destroyed a meaningful part of end-user demand. At the same time, the IEA says the U.S.-Iran interim agreement could allow Gulf exports to recover gradually, and it estimates that flows had already risen from a May low of 9.6 mbd to around 12 mbd by mid-June. Still, July should not be treated as a simple oversupply month. The IEA also reports that May output was 13.6 mbd below pre-conflict levels, global observed inventories drew by 143 mb in May, and OECD government stocks fell to their lowest level since December 1990. These are not normal-market conditions. The stock cushion has been eroded, and if shipping recovery stalls, prices can rebound quickly.

Global oil supply is set to fall by 3.9 mbd to 102.4 mbd in 2026 before rebounding by 8 mbd to 110.3 mbd in 2027, according to the fresh estimates of the International Energy Agency. As for May alone, the agency reported that global output declined to 94.5 mbd, down 600 kbd relative to the month prior and 13.6 mbd below pre‑conflict levels. An interim agreement between the United States and Iran to end the war in the Middle East signed on June 18 paves the way for a reopening of the Strait of Hormuz and a lifting of a US blockade on Iranian oil traffic. If the deal holds, exports and production from the Gulf should see a gradual recovery – not least because Iranian oil exports can fully resume once the US blockade is lifted. Shipments through the Strait were already rising sharply in early June, supported by ship-to-ship transfers in the Gulf of Oman, lifting total flows from a May low of 9.6 mbd to around 12 mbd. A full recovery will not be immediate, however, as mines will have to be removed from the main shipping lanes and supply chains will take time to normalise. Gulf supply losses will be partly offset by continued gains from non-OPEC+ producers. Robust growth from the Americas, along with steep US SPR releases, boosted Atlantic Basin crude exports to markets East of Suez since the start of the war by 3.5 mbd. At the same time, crude imports into China and Japan, in particular, have declined sharply, with each falling by around 40% – or nearly 6 mbd combined. Lower refinery crude runs in China, the Middle East, Eurasia and elsewhere in Asia, down by more than 5 mbd year-on-year in 2Q26, transmitted this supply shock into product markets.

The U.S. Energy Information Administration reported a comparable decline of global oil production in May 2026, but stressed that the character of the decline changed. March and April were months of outright collapse as the Gulf war and the effective closure of Hormuz removed barrels faster than the system could adapt. May still pushed world liquids supply lower, to 93.7 mbd, down by 831 kbd from April, or -0.9% MoM, but the incremental damage was much smaller than in the prior two months. Even so, the level of global output was the lowest in 62 months and the downturn stretched to a third consecutive month. Against May 2025, world production was lower by 11.3 mbd, or -10.7% YoY, which left the annual rate of decline at its deepest in 71 months and extended the year-over-year downswing to three months. Relative to the five-year average for May, global oil supply was lower by 7.2 mbd, or -7.1%. Taking all of these together, May 2026 looked like a transition from collapse to adaptation. World production still made a new cycle low, OPEC remained in a deep contraction, and the modest improvement outside OPEC came mainly from rerouting and emergency substitution rather than from restored Gulf normality. The forward implication is two-sided. In the near term, the market remained fundamentally tight: the IEA estimated that inventories drew at around 4.6 mbd in May alone, and banks still expected several months before Gulf exports and production could normalize. In the medium term, once Hormuz genuinely reopens, the balance could swing quickly the other way. By mid-June, Goldman expected Gulf exports to normalize by the end of July and production by October, and the eventual return of Middle Eastern barrels could tip the market into a significant surplus in 2027.

OPEC crude production declined further in May 2026, extending the war-driven collapse that had already reshaped the group in March and April. According to cartel’s own data, OPEC output fell by another 240 kbd from April to 16.7 mbd. This 1.4% MoM decline extended the monthly downtrend to three months and pushed production to a new low in this century, making May another month of deterioration rather than the first stage of recovery. Year-over-year, output was lower by 7.33 mbd, a 30.5% YoY contraction, the steepest annual decline in more than 25 years and the third consecutive month of yearly decline. Production also stood 6.70 mbd below the 5-year average for May, representing a 29.1% deficit. Middle East output remained heavily curtailed, with the declines concentrated in Iran and Kuwait, partly offset by modest recoveries in Saudi Arabia, Iraq, Nigeria and Venezuela. The internal composition continued to shift away from the traditional Gulf core and toward producers whose barrels were either outside the Hormuz bottleneck or less directly exposed to the conflict. Algeria, Congo, Libya, Nigeria and Venezuela therefore carried more relative weight than they would in a normal month, even where their absolute changes were modest.

The early-June OPEC+ decision to raise production again should be viewed as a continuation of the policy signal established in April and May, but still not as a guarantee of immediate physical supply growth. On 7 June, the seven participating countries — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman — agreed to implement a further 188 kbd production adjustment for July 2026. The decision was framed around market stability, gradual return of voluntary adjustments, monthly monitoring, compensation for previous overproduction and the preservation of flexibility to increase, pause or reverse the phase-out. The compensation period was also extended to the end of December 2026. The reason for the increase was partly political and partly market-facing: OPEC+ needed to show that it remained willing to return barrels and not deliberately tighten a market already under stress from the Gulf war. However, May production data again showed that core cartel members were unable to use their existing allowances fully. Kuwait was still at only 573 kbd, Iraq was still more than 2.60 mbd below its 5-year average, and Saudi Arabia remained almost 2.50 mbd below its longer-term seasonal norm. In such conditions, a quota increase mostly widens the gap between formal targets and effective supply.

May 2026 showed a modest recovery in overall non-OPEC oil production, but the rebound was narrower than the aggregate number suggests. Total supply averaged 74.4 mbd in May, increasing by 301 kbd from April, or +0.4% MoM, and this was the fastest monthly rate of growth in 3 months. The increase broke the 2-month declining sequence that had dominated March and April, so the headline output moved from contraction to cautious repair. The total was lifted mainly by the Americas region, with Brazil and the U.S. as the main contributors, while Europe and Asia-Pacific remained soft and non-OPEC Africa & Middle East was still operating under the shadow of the Gulf war. But even in this region the month was no longer a simple continuation of the April collapse: Qatar began to rebound from an extremely depressed base, Oman strengthened, and the regional total stabilized. On the annual comparison, however, the picture remained negative: production was lower by 1.6 mbd than in May 2025, down 2.1% YoY, extending the annual decline to 3 months. That contrast is important: May delivered a sequential rebound, but not a full normalization of the non-OPEC production balance. Nevertheless, output still stood 2.3 mbd above the five-year May average, a 3.2% premium, meaning the system remained above its historical seasonal baseline despite the war shock. The aggregate therefore looked superficially resilient, but the composition was highly uneven, with Western Hemisphere growth offsetting persistent Gulf-related damage.

U.S. total oil output averaged 24.1 mbd in May 2026, rising by 115 kbd from April, or 0.5% MoM. This was the fourth consecutive monthly increase, which lifted the aggregate to the highest level in six months, but the pace of growth was much more restrained than in April, when the recovery from the January weather shock was still more visible. Compared with May 2025, total production was higher by 960 kbd, or 4.1% YoY, extending the annual growth sequence to 20 months. Relative to the five-year May average, U.S. output was higher by 2.82 mbd, or +13.2%, which means the system was still operating far above its longer-term seasonal average. As Middle East crude production was more than 11 mbd below pre-conflict levels and global inventories were drawing heavily, U.S. crude and product net exports stayed close to the record level reached in May as buyers looked for non-Hormuz supply. At the same time, U.S. drilling activity was improving only gradually: the U.S. rig count rose from 547 on May 1 to 562 on May 29, with oil-directed rigs increasing from 408 to 429, a meaningful but not explosive response to the price shock.

Total shale oil output in the United States on country’s three major deposits – Permian, Bakken and Eagle Ford – eased to 9.12 mbd in May 2026. Production was lower by 24 kbd versus April, representing a decline of 0.3% MoM, and the move effectively marked the fastest monthly rate of decline in four months. The setback was not large in absolute terms, but it interrupted the mild stabilization seen in April and showed that the price shock created by the Gulf war had still not translated into an immediate physical production response. On a year-ago basis, the shale total remained stronger by 241 kbd, or +2.7% YoY, and the annual expansion continued for the 61st consecutive month. The annual growth rate was also the fastest in three months, which makes the yearly dynamic stronger than the monthly one. Relative to the five-year average for May, output stood 1.08 mbd higher, or +13.4%, confirming that the U.S. shale base remained structurally elevated despite the small sequential retreat. The overall market context was unusually supportive for U.S. barrels, but not straightforwardly bullish for near-term U.S. production. Albeit U.S. crude exports reached a record 5.6 mbd in May, the boom, however, was mostly an arbitrage and logistics story rather than proof of an immediate upstream acceleration. Earlier producer commentary was clear that oil above $100/b would not trigger a meaningful U.S. supply response unless prices stayed elevated for more than a quarter, while new drilling and completions still require a long operational lead time.

The U.S. Energy Information Administration reported that global oil demand continued to deteriorate in May 2026, falling down by 204 kbd from April, or -0.2% MoM, which extended the monthly decline to three months, although the rate of decline itself was the slowest over this period. The level of global consumption was the lowest in 40 months, which is a much more severe signal than the modest monthly percentage change alone would suggest. Compared with May 2025, global oil demand was lower by 3.4 mbd, down 3.3% YoY, extending the annual downtrend to three months and marking the fastest annual rate of decline in 65 months. Demand also slipped below normal seasonality: it stood 789 kbd under the May five-year average, a 0.8% deficit. In such circumstances, the International Energy Agency further downgraded its estimates of global oil demand growth this year in its June report, emphasizing that 2Q26 deliveries plunged by 5 mbd on a year-on-year basis in the face of higher fuel prices and disruptions to product availability. Now, the IEA forecasts global oil demand to decline by 1.1 mbd in 2026, which is a downgrade of 700 kbd compared with last month IEA’s forecast, as the impacts of nearly four months of disruptions spread across products and regions. However, the agency sees global oil demand growth rebounding to 2 mbd in 2027 with world consumption rising to a new record of 105.3 mbd, as a normalisation of trade flows, lower oil prices and an improving economic outlook contribute to the recovery.

The International Energy Agency reported further deterioration in global oil stocks in May 2026. According to the agency’s preliminary estimates, the decline in observed inventories around the world accelerated in May to 143 mb (-4.6 mbd) from 74 mb (-2.5 mbd) in April. Despite the significant reductions in demand for crude oil and refined products, the buffers in the global system continue to erode at a record pace. Global stocks have declined by 3.8 mbd on average since the start of the war, of which 2.4 mbd for crude and 1.4 mbd for products. OECD government inventories fell by 163 mb (-1.8 mbd) over the same period to their lowest level since December 1990 as the pace of emergency stock releases accelerated. The IEA stresses that further declines in the coming months could still take global oil stocks to historic lows before the market balance shifts to surplus towards the end of the year. However, detailed IEA’s data on March 2026 showed that OECD total commercial oil inventories shrank less dramatically than it was initially estimated, falling to 470.78 mln tons, down by 1.78 mln tons from February, a 0.4% MoM decline. The headline draw was modest compared with the scale of the external shock, as the month was the first OECD inventory print after the late-February escalation in the Middle East and the effective restriction of Gulf flows. Relative to a year, the OECD total commercial oil stocks even still showed a restrained but clearly positive move: inventories were still 2.05 mln tons above March 2025, a 0.4% YoY increase, extending the annual upward trend to eight months, yet the cushion remained 14.90 mln tons below the five-year average for March, a 3.1% deficit.

U.S. total oil inventories fell further to 1 592 mb in May 2026, extending the severe liquidation that began in April and confirming that the U.S. balance had moved into a clearly depleted position. Total stocks declined by 51.56 mb from April, equating to -3.1% MoM, and fell to the lowest level in 27 months. The monthly draw continued for a second consecutive month, so the April collapse was just the beginning of a more persistent inventory drain. The annual comparison also turned negative: total inventories were 44.26 mb below May 2025, or -2.7% YoY, breaking a 10-month annual expansion phase and producing the fastest annual rate of decline in 27 months. Against the five-year May average, total stocks stood 108.74 mb lower, representing a -6.4% deficit, which is a much more severe gap than in April and shows that the U.S. oil complex entered the summer driving season with much thinner aggregate protection. The anatomy of the May draw was different from a simple across-the-board stock collapse. The SPR was drained aggressively as the U.S. executed its emergency-release commitments, commercial crude was pulled lower by high exports and refinery demand, and refined products remained deeply below normal even though the monthly pace of product draws moderated from April. The only major source of comfort was NGLs, where inventories rebuilt strongly and remained far above seasonal norms.

Cushing crude inventories fell sharply to 22.44 mb in May 2026, close enough to operational minimum concerns, down by 7.33 mb from April, or -24.6% MoM, and 1.65 mb below May 2025, or -6.8% YoY. That left the hub at its lowest level in five months and widened the deficit to the five-year average to 11.344 mb, or 33.6%, so May marked a clear return from spring normalization to outright tightness. The monthly draw was the steepest in 51 months and extended the downswing to a second consecutive month, while the annual decline was the deepest in six months and the fourth straight negative YoY reading, showing that the deterioration was no longer just a reversal of March’s temporary stock rebuild but a more persistent tightening phase. The main driver was the Gulf war’s increasingly direct pull on U.S. barrels: weekly EIA data showed Cushing draws of 648 kb in the week ended May 1, 1.7 mb in the week ended May 8 and 1.6 mb in the week ended May 15, while U.S. crude exports remained exceptionally strong as refiners in Europe and Asia substituted away from disrupted Middle Eastern supply. Late-May ceasefire and Hormuz-reopening headlines briefly pressured oil prices, but traffic through the strait was still only a small fraction of pre-war levels, so price relief arrived faster than physical normalization.

Global offshore oil inventories fell sharply in May 2026, with the worldwide total dropping to 79.11 mb. The decline amounted to 62.19 mb from April, a 44.0% MoM fall, which broke the preceding three-month upward sequence and marked the fastest monthly rate of decline in recent decades. The level was also the lowest in nine months. Compared with May 2025, global offshore stocks were only 4.21 mb higher, up 5.6% YoY, extending the annual increase to 11 months but at the slowest growth rate in that same period. Against the 5-year average for May, the global position moved into deficit: inventories were 8.43 mb below normal, a 9.6% shortfall. The overall amount of the stocks therefore shifted from the March-April pattern of war-driven floating accumulation to a May pattern of forced liquidation and partial release of trapped barrels. This is consistent with the wider physical picture: the IEA said global observed inventories drew by 143 mb in May, while Reuters reported that more tankers were leaving the Gulf during May, often with tracking systems switched off, and that Vortexa estimated around 65% of outbound laden tankers crossed in “dark” mode during the month.

AC - Oil Market Report - Jun-2026.pdf

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