Oil Market Report - March 2026

March 2026 was not a conventional bullish month for crude oil so much as a succession of repricing around one dominant question: how much of the Gulf export system could continue to function once the U.S.-Israeli war on Iran began on February 28 and the Strait of Hormuz shifted from a theoretical chokepoint to a live supply constraint.

EXECUTIVE SUMMARY

March 2026 was not a conventional bullish month for crude oil so much as a succession of repricing around one dominant question: how much of the Gulf export system could continue to function once the U.S.-Israeli war on Iran began on February 28 and the Strait of Hormuz shifted from a theoretical chokepoint to a live supply constraint. The first week of March priced the war’s outbreak and the near-shutdown of a critical export chokepoint. The middle of the month tested whether emergency reserves, rerouting and tactical diplomacy could cap the upside; they could moderate it, but not remove it. The late-month short correction around March 23 proved that the premium remained highly reversible when the military path softened, yet the rapid recovery that followed proved the opposite point as well: until traders could see credible, durable normalization in maritime flows and Gulf operating conditions, every dip would be treated as provisional. In net terms, Brent and WTI both delivered extraordinary month-to-date gains – from the March 2 opening session to March 30, Brent front-month futures rose by $31.22/bbl to $108.96/bbl, recording a gain of 40.2%, while WTI added $30.88/bbl to $102.11/bbl, going up 43.4%. On a monthly-average basis, Brent traded in March 2026 around $98.18/bbl and WTI around $90.46/bbl, leaving an average Brent premium of $7.72/bbl. The premium narrowed to just $1.79/bbl on March 6, when the market was still in indiscriminate panic-buying mode, but widened to $13.96/bbl on March 20 once traders began differentiating between inland U.S. crude and internationally traded seaborne barrels exposed to Hormuz-related disruption.

April 2026 starts with crude in an unusually unstable equilibrium: the market is still carrying a large war premium, but it is no longer trading the first-shock panic of early March. The key near-term milestones are unusually clear. OPEC+’s eight voluntary-cut members are due to meet again on April 5 after already approving a 206 kbd April supply increase on March 1, while President Trump’s self-imposed pause on direct attacks on Iranian energy assets runs until April 6. At the same time, the market is watching whether traffic through the Strait of Hormuz normalizes in early April or whether the partial rerouting through Yanbu and Fujairah proves insufficient. OPEC has explicitly said it retains flexibility to pause or reverse the phase-out of voluntary cuts, and Barclays’ base case is that if traffic normalizes by early April, Brent can move back toward a much lower equilibrium later in the year. The technical backdrop still favors a structurally bullish but tactically overextended market. On the moment of writing (March 30) Brent trades at $108.96/bbl and WTI at $102.11/bbl, both well above rising 20-day and 50-day averages, while 14-day RSI for both contracts is near 67 rather than at extreme overbought levels. That suggests momentum remains positive, but also that the market is vulnerable to sharp air pockets on any credible de-escalation headline. The base case for April is therefore not a straight-line continuation higher, but a wide, volatile consolidation with downside retracements bought unless shipping flows clearly normalize. In that central case, Brent likely trades mainly in a $98-115/bbl band and WTI in roughly $90-106/bbl, with $100 Brent / low-$90s WTI acting as the first important support zone and the March highs near $119.5/bbl remaining the key resistance reference. The bearish case for April is not peace, but visible operational normalization. The signals would be concrete: successful diplomacy around Hormuz, more tankers transiting without incident, further strategic stock releases, and evidence that Saudi rerouting plus Fujairah exports are stabilizing physical balances. A softer macro overlay would reinforce that scenario: ADNOC’s chief has already warned that $100+ oil is slowing global growth, which means demand destruction becomes more relevant the longer prices stay elevated. In that case Brent could fall back into the low-$90s and WTI toward the mid-/high-$80s. The bullish case remains the more dangerous one because it is tied to path dependency in the conflict. If the April 6 deadline passes without credible de-escalation, or if the conflict widens to direct strikes on more Gulf infrastructure or any attempt to seize Kharg Island, the market will likely retest the March highs quickly. In that scenario Brent would probably move back through $115/bbl and challenge $119.5/bbl, while WTI could push decisively above $105 and then re-open the path toward triple-digit highs closer to the March spike.

The war in the Middle East is creating the largest supply disruption in the history of the global oil market. According to the estimates of the International Energy Agency, with crude and oil product flows through the Strait of Hormuz plunging from around 20 mbd before the war to a trickle currently, limited capacity available to bypass the crucial waterway, and storage filling up, Gulf countries have cut total oil production by at least 10 mbd. While the situation on the ground is fast evolving and at times opaque, the IEA estimate that crude production is currently being curtailed by at least 8 mbd, with a further 2 mbd of condensates and NGLs shut in. Major supply reductions are seen in Iraq, Qatar, Kuwait, the UAE and Saudi Arabia. In such circumstances, global oil supply is projected by the agency to plunge by 8 mbd in March, with curtailments in the Middle East partly offset by higher output from non-OPEC+ producers, Kazakhstan and Russia following disruptions at the start of the year. While the extent of losses will depend on the duration of the conflict and disruptions to flows, the IEA still estimates global oil supply to rise by 1.1 mbd in 2026 on average, with non-OPEC+ producers accounting for the entire increase.

Meantime, global liquids supply rebounded in February 2026 after the sharp January pullback, according to the U.S. Energy Information Administration, but the recovery was uneven across components and, importantly, it set the base point just before the geopolitical shock that followed in March. World production averaged 107.88 mbd, rising by 1.5 mbd versus January, which corresponds to a 1.5% MoM increase and stands out as the strongest month-to-month gain in five months. That upswing also broke a short-lived two-month downswing, signaling that January’s weakness was at least partly transitory rather than the beginning of a persistent contraction cycle. On a year-earlier comparison, global output was higher by 4.0 mbd, up 3.8% YoY, extending the annual expansion to seventeen consecutive months, though the growth rate cooled versus late-2025 highs. Relative to longer-term seasonal norms, supply remained structurally elevated: production ran 8.6 mbd above the five-year average for February, around 8.6% above trend, reinforcing that the underlying capacity-to-produce environment was still loose even after the volatility around the turn of the year.

OPEC crude production increased in February 2026, according to cartel’s own data, reversing January’s decline and pushing the block back to its highest supply level in 35 months. Total output rose by 177 kbd from the previous month to 28.6 mbd. That represented a 0.6% MoM increase, the fastest monthly rise in five months. The month itself was defined by renewed growth in the group total, further gains from Saudi Arabia, Iraq, the U.A.E. and Iran, and a sharp rebound in Venezuela, partly offset by renewed weakness in Libya and Nigeria. On an annual basis, OPEC crude production was higher by 1.77 mbd than in February 2025, or +6.6% YoY, extending the upward year-on-year pattern to 15 months, although the pace of annual growth slowed to the weakest reading in six months. Relative to the 5-year average for February, OPEC supply was higher by 1.50 mbd, underscoring that the group was still producing well above its normal seasonal level even before the far more severe dislocation that emerged in March. That distinction matters. The effective closure of Hormuz, attacks and threats against Gulf energy infrastructure, steep March output losses in Iraq, Saudi Arabia, the U.A.E. and Kuwait, and the limited usefulness of nominal spare capacity when export routes are impaired all mean that February now reads as the last relatively normal month before a wartime supply shock. That is why the next OPEC+ meeting scheduled on 5 April matters so much. On 1 March, the eight OPEC+ countries that are unwinding voluntary cuts still agreed to raise April quotas by 206 kbd, while explicitly stating that they retained full flexibility to increase, pause, or reverse the phase-out. Given the scale of March disruption, the most plausible base case is that the alliance will prioritize operational flexibility and market stabilization over any rigid adherence to previously planned increases, especially if Hormuz remains only partially functional or if further damage to Gulf infrastructure persists into April.

Non-OPEC total oil supply rose to 72.7 mbd in February. That was an increase of 816 kbd from January, equivalent to +1.1% MoM, and it represented the fastest monthly rate of expansion in six months. The move also broke the two-month declining run that had culminated in January’s weather-distorted trough. On an annual comparison, non-OPEC oil production was higher by 1.47 mbd, or +2.1% YoY, extending the upward sequence to 14 months. Even so, the annual growth rate remained far less impressive than it looked through much of late 2025, which is consistent with a broad moderation in incremental growth outside OPEC. Relative to the longer-term seasonal norm, February oil production still stood 5.2 mbd above the five-year average for the month, representing a premium of 7.8%. Albeit February 2026 marked a clear rebound in non-OPEC oil production after the January weather- and outage-driven softness, the recovery was uneven across the map and, in several cases, quite fragile. The aggregate improvement was carried overwhelmingly by the non-OPEC Americas, with the U.S., Brazil and Argentina doing most of the lifting, while Europe, non-OPEC Asia-Pacific and the CIS all softened further on the month. Non-OPEC Africa & Middle East also recovered modestly, yet that regional improvement needs to be read with caution because the February data effectively capture the last pre-war position: the U.S.-Israeli strikes on Iran began on February 28.

U.S. total oil output increased to 23.58 mbd in February 2026, rising by 580 kbd from January, or +2.5% MoM, and thereby ending the two-month contraction that culminated in January’s weather-hit trough. Even so, the rebound should be read as only partial normalization rather than a full recovery, because the February level still sat below the late-2025 highs and remained materially under December. On the annual comparison, total output was higher by 478 kbd, up 2.1% YoY, extending the positive yearly sequence to 17 months. Relative to the five-year average for February, U.S. oil production was stronger by 3.32 mbd, equating to a 16.4% premium, which continues to show how far the national liquids system is operating above its pre-2025 seasonal norm. The month’s pattern reflects the unwind of January freeze-offs in major producing areas, especially the Permian, where crude and gas production began recovering rapidly after the late-January cold snap. That said, the bigger strategic takeaway lies beyond the February data itself: March disruptions in the Strait of Hormuz has sharply raised global prices and highlighted the value of U.S. supply resilience, yet shale executives have also made clear that even a move above $100/bbl is unlikely to trigger an immediate drilling surge unless prices stay elevated for longer, meaning February’s rebound should not be conflated with the start of a new U.S. supply acceleration cycle.

U.S. shale oil output climbed back to 10.64 mbd in February, rising by 356 kbd from the previous month. The increase translated into a 3.5% MoM gain and marked the strongest sequential improvement in 24 months, clearly indicating that most of January’s weather-related curtailment in the United States sat in tight oil. The rebound also pulled shale off the 12-month low reached in January. On a year-ago basis, shale production increased by 460 kbd, or +4.5% YoY, extending the long annual growth streak to 58 months. The yearly growth rate also re-accelerated sharply from January’s unusually weak reading, suggesting that the prior month had indeed overstated underlying softness. Relative to the five-year average for February, shale supply was higher by 1.72 mbd, or +19.3%, underlining how far the segment still stands above its pre-2020 seasonal baseline. Shale’s share in total U.S. crude output rose to 77.7%, up by 176 bps from January and by 249 bps from a year earlier, fully reversing January’s compositional shift toward conventional barrels.

The International Energy Agency considers the war in the Middle East as not only the largest supply disruption in the history of the global oil market, but also as a serious hit to global demand for oil. The suspension of flights at major airports in the Middle East, with a knock-on effect on hubs elsewhere, has materially reduced global jet fuel demand. Plunging LPG and naphtha supplies are already forcing petrochemical plants to curb their production of polymers, aggravating the loss of Gulf petrochemical flows. LPG use in cooking and heating, especially in India and East Africa, is also at risk. More broadly, higher oil prices and a deteriorating economic outlook have begun to erode demand across the product spectrum. In this context, the IEA has reduced its forecast for global oil demand growth in March and April by more than 1 mbd on average – and for 2026 as a whole by 210 kbd to 640 kbd.

Although the U.S. Energy Information Administration reported the strongest monthly rebound in global oil consumption in February 2026 over the past eight months after a seasonally weak January print, now it’s obvious that this strength won’t continue in the spring months. According to the EIA, global consumption rose to 105.1 mbd in February, increasing by around 2.0 mbd from January, equating to 2.0% MoM. Compared with February 2025, world consumption was higher by the same 2.0 mbd and up 2.0% YoY, extending an annual growth streak that has now run for nine months. Against the longer-term seasonal anchor, the global level still leaned tight-to-strong, sitting 4.96 mbd above the February five-year average, a 4.9% premium, which indicates that the recent bounce occurred from a higher baseline than history would typically imply. The February demand recovery was disproportionately visible in OECD Europe and still constructive in non-OECD Asia, while a handful of regions remained either structurally soft versus seasonality or marginally weak on the month.

Global observed inventories of crude and products are currently assessed at more than 8.2 billion barrels, the highest level since February 2021, according to the most recent data of the International Energy Agency. Roughly half of these are held in OECD countries, of which 1.25 billion barrels by governments for emergency purposes, with a further 600 million barrels of commercial stocks held under government obligation. IEA member countries agreed on 11 March to make available an unprecedented 400 mb of oil from their emergency reserves available to the market to mitigate the negative impact on economies from the supply disruptions due to the war in the Middle East.

Detailed statistics on December 2025 confirms earlier IEA’s estimates that OECD commercial oil inventories continued to grow over the month, although the pace of inventories build over the month was somewhat muted comparing to initial expectations. The total stocks rose to 471.0 mln tons, but that was only 1.56 mln tons above November, equivalent to a 0.3% MoM increase. The monthly advance was not large in absolute terms, but it extended the rebuilding phase to a second month and left total inventories at their highest level in three months. In directional terms, the series therefore continued the upward MoM trend for two months rather than merely stabilising after October’s draw. Relative to a year ago, the stockpile was 7.16 mln tons higher than in December 2024, which translates into a 1.5% YoY increase. The annual expansion remained firmly intact for a fifth straight month, and this rise was the strongest in 56 months, underscoring that the annual comparison continued to improve even though the sequential December build was only moderate. Relative to the five-year average for December, however, OECD total oil inventories were still 15.97 mln tons lower, representing a 3.3% deficit. The overall message is that the stock cushion kept rebuilding into year-end, but it had not yet fully closed the gap to normal seasonal levels.

US total oil inventories retreated in February 2026, but the headline decline again concealed a meaningful reshuffle between upstream barrels and refined products. Total stocks eased to 1 692 mb, down 10.95 mb from January. In rate terms, the draw amounted to -0.6% MoM, taking the aggregate stocks to the lowest level in 3 months and extending the month’s tone of tighter balances versus the start of the year. Even after the monthly pullback, the system remained materially looser than a year earlier: total inventories were 72.55 mb higher, which translates into 4.5% YoY growth. The annual increase has now been running for 8 months, although the current pace of growth was the mildest of the last 3 months, suggesting the year-on-year re-accumulation is still intact but no longer accelerating at the margin. Against seasonality, total stocks stood 12.71 mb below the five-year February norm, a shortfall of -0.7%, leaving the aggregate position close to normal despite sharp divergences across components. However, after the reporting period, the IEA’s member countries agreed on 11 March 2026 to make 400 mb of oil available from emergency reserves, with the United States slated to provide 172 mb from the SPR over roughly 120 days, and IEA communications indicate that releases from the Americas are expected to be available by end-March. This decision obviously introduces a downside skew for the SPR volumes and, by extension, for total inventories in late March and subsequent months, even if commercial balances were to stabilize.

Cushing crude inventories rose to 26.46 mb in February 2026, increasing by 2.42 mb from January, or +10.1% MoM, and by 0.77 mb from a year earlier, or +3.0% YoY. Although February brought a meaningful relaxation in prompt tightness at the delivery hub, a full normalization of conditions wasn’t achieved yet, because stocks still stood 7.24 mb below the five-year average for the month, leaving them lower by 21.5% versus seasonal norms. The monthly build was the strongest in 12 months and extended the recovery to a third consecutive month, suggesting that inland crude availability improved relative to local refinery demand and pipeline pull after a tighter winter period. That interpretation was reinforced by developments after the month-end: the EIA reported additional U.S. crude stock builds in March, pushing Cushing inventories to their highest level since August 2024 and confirming that February was part of a broader replenishment phase rather than a temporary fluctuation.

World offshore oil inventories stabilized in February 2026, reversing part of January’s drawdown but without eliminating the larger surplus versus longer-term seasonal conditions. Stockpiles rose to 114.87 mb, up by 3.27 mb from January, a 2.9% gain MoM, which also marked the strongest monthly growth pace in five months and pushed the total volumes to a three-month high. Even with that rebound, the global footprint remained structurally heavy: inventories were higher by 42.27 mb from a year earlier, up 58.2% YoY, extending the annual uptrend to eight months while slowing to the softest yearly growth rate in three months. Relative to the January seasonal baseline, the market still carried substantial volumes of oil on water, with global stocks standing 37.23 mb above the 5-year average for this month of a year, equating to a 47.9% surplus. However, this February print is best viewed as a pre-shock baseline and the rapid shift in physical availability and trade routing that followed is set to matter greatly for March and probably to the months to follow.

AC - Oil Market Report - Mar-2026.pdf

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