Oil Market Report - May 2026

May 2026 became the first month since the Gulf war began in which crude futures stopped behaving like a one-way supply-panic trade and started trading a more complicated “peace hope versus physical shortage” regime.

EXECUTIVE SUMMARY

May 2026 became the first month since the Gulf war began in which crude futures stopped behaving like a one-way supply-panic trade and started trading a more complicated “peace hope versus physical shortage” regime. Brent and WTI both fell sharply from their end-April levels, not because the market concluded that the Strait of Hormuz shock had been solved, but because repeated U.S.-Iran deal headlines, weaker demand expectations and visible demand destruction forced traders to mark down the most extreme war premium. Albeit May was bearish in terms of crude price performance, the month didn’t bring normalization in physical terms. Crude futures are heading toward the month’s close far below the early-May highs, yet still at very elevated absolute levels, with daily price action continuing to react violently to every report about Hormuz traffic, U.S. strikes, Iranian negotiation terms and emergency inventory use. From the April 30 settlement to May 28, Brent front-month futures fell by $16.00/bbl to $94.40/bbl, a decline of 14.5%, while WTI lost $14.48/bbl to $90.59/bbl, down 13.8%. The month’s intraday highs were recorded immediately after the opening squeeze: Brent reached $115.30/bbl on May 4, while WTI touched $107.46/bbl the same day. The lows were set late in the month, on May 27, when Brent printed $91.75/bbl and WTI $87.77/bbl, as optimism around a draft U.S.-Iran framework briefly overwhelmed residual supply fear. Monthly average settlements remained high by historical standards, at $103.95/bbl for Brent and $98.77/bbl for WTI.

Heading towards June 2026, crude futures are in a materially weaker technical position than at the start of May, but still embedded in a fragile physical supply shock. As of May 28, both Brent and WTI are trading below their 20-day and 50-day moving averages, with 14-day RSI readings near 42. That is no longer a bullish momentum setup: the late-May break through $100/bbl in Brent and the high-$90s in WTI has shifted the chart bias toward rallies being sold unless confirmed physical tightening reappears. Still, volatility remains structurally high, with recent ATRs above $5/bbl, so any June forecast must be framed as a scenario tree rather than a single linear path. The base case for June is a wide, volatile range with a mild downside bias. The decisive variable is whether the draft U.S.-Iran framework becomes operational. Iran state TV reported that a draft MoU would restore commercial Hormuz shipping toward pre-war levels within one month, while the U.S. would withdraw forces and end the naval blockade; however, the framework is unofficial, excludes military vessels, and Iran is demanding tangible verification. That leaves the market in an awkward middle ground: the probability of reopening has risen, but the evidence of normalized flows is still thin. The bearish June case would require visible normalization: more tankers transiting with transponders on, lower freight/insurance costs, U.S. blockade relief, and no renewed attacks near shipping lanes. In that scenario, Brent can test $90/bbl and then the mid-$80s, while WTI could move toward $86/bbl and then $82-84/bbl. OPEC+ will not prevent that decline: the seven-country June target increase of 188 kbd is small and largely symbolic while Gulf logistics remain impaired. The bullish case is a failed deal or another military/shipping incident. A June close back above Brent’s $100-104/bbl resistance zone and WTI above $98-100/bbl would signal that the late-May breakdown was only a false peace trade. In that case, Brent could retest $108-112/bbl and WTI $102-106/bbl.

Global oil supply declined by a further 1.8 mbd in April 2026 to 95.1 mbd, according to the most recent monthly report of the International Energy Agency, taking total losses since February to 12.8 mbd. With Hormuz tanker traffic still restricted, cumulative supply losses from Gulf producers already exceed 1 billion barrels with more than 14 mbd of oil now shut in, an unprecedented supply shock. However, the current supply-demand gap is significantly smaller, as the market was already in surplus heading into the crisis while producers are responding to market signals. Thus, Saudi Arabia and the U.A.E. have successfully redirected some exports to terminals loading outside of the Strait. At the same time, producers outside of the Middle East also pushed output higher and lifted exports to record levels in response to the crisis. Indeed, 2026 supply growth expectations from the Americas have been revised up by more than 600 kbd since the start of the year, to 1.5 mbd on average. Moreover, Atlantic Basin crude oil exports, now heading primarily to hard-hit East of Suez markets, have increased by 3.5 mbd since February, with notable gains from the United States, Brazil, Canada, Kazakhstan and Venezuela. Russia’s crude oil exports have also risen, as repeated attacks on its refineries have cut domestic use and led to higher shipments, while the United States temporarily waived sanctions on Russian oil on water. Assuming flows through the Strait gradually resume from June, the IEA projects global oil supply to decline by 3.9 mbd on average in 2026, to 102.2 mbd.

The U.S. Energy Information Administration tells the same story of further deterioration of global oil production in April 2026, marking the month as the second and deeper leg of the Gulf war supply shock. According to this agency, world liquids output fell to 94.5 mbd, down by 2.5 mbd from March, a 2.6% MoM decline. That pushed global supply to its lowest level in 60 months, the worst point in the post-pandemic era. The annual comparison weakened even more sharply: output was lower by 9.9 mbd than in April 2025, down 9.5% YoY, which amounts to the fastest rate of decline in 66 months. The world output also moved decisively below its longer-term seasonal norm, with production running 6.2 mbd below the five-year average for April, or 6.2% lower. All these numbers reflect the fact that April was a month in which the physical oil production itself tumbled materially below normal as Gulf shut-ins deepened and the earlier logistical shock became a full-scale upstream supply loss, with crude shut-ins across Iraq, Saudi Arabia, Kuwait, the U.A.E., Qatar and Bahrain increased from 7.5 mbd in March to 9.1 mbd in April. As the Strait has remained mostly closed during the first two decades of May, the next month’s production data would bring further disruptions and new lows in global oil supply.

OPEC crude production fell again in April 2026, even on a restated membership basis. Albeit the U.A.E. formally had left the OPEC from 1 May 2026, and the cartel still accounted the country as a participating state in its April data, we’ve decided to consider the U.A.E. as a non-OPEC states to make OPEC’s data aligned with EIA’s one. According to this assumption, OPEC output declined in April 2026 by another 1.93 mbd from March to 17.0 mbd. This 10.2% MoM drop extended the monthly decline to two months and pushed cartel’s production to the new lowest level for more than 25 years, confirming that the Gulf war shock has become a deepening physical supply event. The annual comparison was even more severe: even excluding the U.A.E., total production was 6.80 mbd lower than in April 2025, a 28.6% YoY contraction and the sharpest annual decline over the same very long period of time. Output also stood 6.54 mbd below the 5-year average for April, cementing a 27.8% deficit, which shows that the collapse was far outside normal seasonal or policy-cycle variation. The composition of OPEC crude supply continued to change radically. Gulf members most exposed to Hormuz, export congestion and infrastructure damage lost weight, while non-Gulf producers gained relative importance even when their absolute output increased only modestly. April therefore again wasn’t about quota discipline, but far more about the physical ability to produce, store, move and load crude under wartime conditions.

The early-May OPEC+ decision again should be viewed as a policy signal rather than an immediate supply event. On 3 May, the seven participating countries — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman — agreed to implement a 188 kbd production adjustment for June as part of the gradual return of the additional voluntary cuts announced in April 2023. OPEC framed the move as a measure to support market stability, while emphasizing that the countries retained full flexibility to increase, pause or reverse the phase-out depending on market conditions, and that the adjustment would also help members accelerate compensation for earlier overproduction. The absence of the U.A.E. from the statement was notable after its withdrawal from OPEC+, and the decision was widely seen as largely symbolic while Hormuz remained constrained: Al Jazeera reported that Saudi Arabia, Iraq and Kuwait were among the producers whose exports had been throttled, and that even a reopening of the Strait would likely require weeks or months before flows normalized. The practical consequence is that quota space and physical supply continued to diverge. Raising targets may reassure consumers that OPEC+ is not deliberately withholding barrels, but April showed that the binding constraint was not willingness to produce; it was export security, storage saturation, damaged infrastructure and the limited capacity of bypass routes.

Total non-OPEC oil production averaged 74.1 mbd in April, taking into account EIA’s decision to consider the U.A.E. as the participant of the non-OPEC group already in its April datasheets, albeit formally the country has left the OPEC only since May 1, 2026. The overall output of the group was down by 727 kbd from March, a decline of 1.0% MoM, extending the current monthly downturn to 2 months and leaving output at the lowest level in 27 months. The annual comparison also turned distinctly weaker: supply was lower by 1.8 mbd than a year earlier, down 2.4% YoY, which was the fastest rate of decline in 61 months. Even so, the aggregate still remained 2.2 mbd above the five-year April average, a premium of 3.0%, so the level itself was not historically depressed in absolute terms. However, after several quarters in which non-OPEC growth had been doing most of the balancing work in the global scale, April marked a month in which that buffer weakened materially under the weight of the Gulf shock and its spillovers into regional output, tanker movements and storage constraints. The dynamics of production in different regions of the group was uneven. The Americas, led by Brazil and the still-rising U.S., continued to provide the main cushion. Kazakhstan also helped counterbalance losses elsewhere. By contrast, Europe and the CIS were soft, and the decisive burden remained in Africa & Middle East, where the Gulf war kept dragging on production.

U.S. total oil output averaged 24.0 mbd in April 2026, rising by 370 kbd from March, or 1.6% MoM, and extending the sequential recovery to a third month after the January weather-driven trough. The level was the highest in five months, which matters because the U.S. oil complex was no longer merely recovering from the winter disruption but had moved back above the late-2025 range. Compared with April 2025, total output increased by 1.01 mbd, or 4.4% YoY, keeping the annual expansion intact for a 19^th consecutive month and delivering the fastest annual growth rate in five months. The comparison with longer-term seasonal norms was also strong: April output exceeded the five-year average by 2.86 mbd, or 13.5%, confirming that U.S. liquids production remained structurally elevated even before any full investment-cycle response to the Middle East shock could materialize. Although April was the second month of the Gulf war shock, the U.S. domestic production response was positive, but still not explosive: the increase looked more like continued normalization plus incremental operating strength than a sudden shale surge. Recall that U.S. shale executives did not expect $100/bbl oil to trigger a major drilling response unless high prices persisted for more than a quarter, and some producers emphasized that 2026 supply could not be materially improvised around a short-term price spike. The U.S. therefore became more strategically important as a non-Hormuz source of liquids, but April’s numbers still reflected the physical and capital-cycle limits of near-term supply elasticity.

U.S. shale oil production (the aggregate on Permian, Bakken and Eagle Ford only) rose to 9.12 mbd in April 2026 from 9.11 mbd in March. The gain was only marginal, at 9.4 kbd or 0.1% MoM, but it still extended the sequential upswing to three consecutive months and lifted the aggregate to its highest level in five months. The annual comparison was firmer: output was higher by 145 kbd, or 1.6% YoY, which prolonged the growth streak to 60 months. Relative to the five-year average for April, the three-hub shale total was stronger by 1.10 mbd, a 13.7% premium, so even this narrower shale definition continues to sit materially above its historical norm. The share picture was more mixed as shale represented 66.4% of U.S. crude production in April, down by 84.2 bps from March and by 98.3 bps from a year earlier. In other words, April 2026 was a month of resilience rather than breakout growth for U.S. shale. The aggregate edged higher, but only marginally as only Bakken and Eagle Ford advanced, while Permian softened. Albeit the U.S. shale complex is benefiting from a powerful improvement in external pricing and export incentives, it is still constrained by disciplined capital behavior and operational lags.

Albeit cumulative oil supply losses from Gulf producers already exceed 1 billion barrels with more than 14 mbd of oil now shut in, the International Energy Agency notices that the current supply-demand gap is significantly smaller, as the market was already in surplus heading into the crisis while producers and consumers alike are responding to the crisis. Thus, refiners have reduced runs and sharply scaled back crude imports. Chinese seaborne crude imports fell by a massive 3.6 mbd from February to April, according to Kpler. Major reductions in imports were also seen in Japan (-1.9 mbd), Korea (-1.0 mbd) and India (-760 kbd). But while the slowdown in global refinery activity – by around 5 mbd year-on-year in April – has temporarily eased tensions in the crude market, tightness is quickly spreading to product markets. End users are also reducing consumption. Global oil demand is now expected to contract by 2.4 mbd in annual terms in 2Q26 and to decline by 420 kbd for the year as a whole, 1.3 mbd weaker than IEA’s pre-conflict forecast. For now, the steepest losses are seen in the petrochemical sector where feedstock availability is becoming increasingly constrained. Aviation activity is also running well below normal levels, helping to ease some of the pressure on jet fuel prices, which nearly tripled after Middle Eastern exports were cut off. Higher prices, a deteriorating economic environment and demand-saving measures will further weigh on global oil consumption. However, demand may swing back to growth towards the end of the year if a deal to end the war is agreed that allows flows through the Strait of Hormuz to gradually resume from 3Q26.

The same time, the U.S. Energy Information Administration reported that global oil consumption recovered sequentially in April after the March shock, but stressed that the recovery was lower-quality than the headline monthly increase suggests: non-OECD Asia and China carried much of the rebound, while the OECD remained under pressure on an annual basis and the Middle East stayed the clearest direct casualty of the Gulf war. According to the EIA, global consumption averaged 103.0 mbd in April, rising by 836 kbd from March, up 0.8% MoM. That monthly increase was important because it prevented the March disruption from turning into an immediate sequential collapse at the global level. Yet the annual comparison turned negative: demand was lower by 107 kbd than in April 2025, down 0.1% YoY, breaking a 61-month annual expansion sequence and therefore marking the fastest annual rate of decline in the post-pandemic era. Relative to the April five-year average, consumption still stood 3.4 mbd higher, a 3.4% premium, meaning the level remained elevated versus history even as the annual momentum deteriorated. 

The International Energy Agency reported that global observed oil inventories drew by 129 mb in March and by a further 117 mb in April, according to preliminary data. Continued disruptions to seaborne trade through the Strait of Hormuz saw on-land stocks drop by 170 mb (-5.7 mbd) in April, while oil on water rebounded by 53 mb. OECD countries’ on-land stocks plummeted by 146 mb (-4.9 mbd) while visible non-OECD stocks fell by 24 mb. The agency also highlighted that while demand may swing back to growth towards the end of the year if a deal to end the war is agreed that allows flows through the Strait of Hormuz to gradually resume from 3Q26, supply will likely be slower to recover. As a result, the oil market remains in deficit until the final quarter of the year. With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period.

Meantime, detailed data on the last pre-war month – February 2026 – showed that OECD total oil inventories rose to 472.56 mln tons, building by 3.52 mln tons from January, equal to a 0.8% MoM gain. The rate of increase was the fastest in six months, giving the monthly move more analytical weight than a routine seasonal fluctuation. It also lifted OECD total oil inventories to the highest level in 20 months, which means the February build pushed the aggregate beyond the late-2025 recovery phase and into a materially stronger position just before the crisis. On a year-earlier comparison, total stocks were 4.64 mln tons higher, equivalent to a 1.0% YoY increase. The annual improvement extended to a seventh consecutive month, confirming that the OECD balance had been rebuilding for more than half a year even though the pace of recovery varied materially across crude and products. The five-year comparison remained negative: total oil inventories were still 17.48 mln tons below the normal February level, a 3.6% deficit. Thus, February improved the cushion but did not eliminate the structural shortfall versus historical seasonal norms.

U.S. total oil inventories fell sharply in April 2026, with the aggregate declining to 1 644 mb. The draw amounted to 56.51 mb from March, or -3.3% MoM, taking the level of stocks to its lowest level in 10 months and delivering the fastest monthly rate of decline in for more than 20 years. That was a striking break from March, when total stocks were still slightly above their five-year seasonal norm. The annual comparison remained positive, but it clearly softened: total inventories were 37.99 mb higher than in April 2025, equal to 2.4% YoY, extending the annual expansion to 10 months but also producing the slowest annual growth rate in six months. Against the five-year April average, total stocks were 46.59 mb lower, representing a -2.8% gap, so the overall U.S. oil balance moved from marginal surplus in March into a visible seasonal deficit in April. In practical terms, April became the first month in which the IEA-coordinated emergency stock release and the prolonged Gulf war disruption were both visible in U.S. stocks.

Cushing crude inventories eased to 29.772 mb in April 2026, down by 1.693 mb from March, or -5.4% MoM, though still 4.071 mb above April 2025, or +15.8% YoY. The draw broke the prior four-month rebuilding sequence and was the steepest monthly decline in five months, while the annual comparison stayed positive for a fourth straight month. In absolute terms, the hub moved away again from the near-normal position reached in March and ended April 3.812 mb below the five-year average for the month, posting a deficit of 11.4%, which indicates that the inland U.S. buffer started to tighten again rather than merely flattening out. The intra-month dynamics was even more important here: early-April EIA data still showed Cushing at its highest level since July 2024, but by late April the balance had turned as the Gulf war kept flows through Hormuz severely disrupted and pushed overseas buyers toward U.S. barrels. In result, U.S. crude exports rose to a record 6.438 mbd in the week ended April 24 and the United States became a net crude exporter on a weekly basis for the first time since World War II.

Global offshore oil inventories rose again in April 2026, but the increase was far milder than the March shock and the structure of the build remained heavily distorted by the Gulf war. Worldwide offshore stockpiles reached 141.26 mb, up by 1.16 mb from March, a 0.8% MoM increase. That was the third consecutive monthly gain, but also the slowest monthly growth rate in three months, suggesting that the immediate post-Hormuz surge was no longer broadening at March’s pace. The level was nevertheless the highest in 68 months. The monthly increase again was highly uneven – the Middle East Gulf absorbed another major build, West Africa gained as Atlantic Basin trade routes lengthened, while Asia, the North Sea, the US Gulf Coast and the residual bucket all declined. Compared with April 2025, global offshore inventories were higher by 45.06 mb, up 46.8% YoY, extending the annual uptrend to ten months, although the pace of yearly growth was the slowest in seven months. The surplus versus seasonal history remained substantial: inventories stood 49.76 mb above the 5-year average for April, a 54.4% premium. This fits the broader market picture reported by the IEA: global observed inventories were still drawing heavily in April because on-land stocks were being depleted, but oil on water rebounded as Middle East bypass routes and longer Atlantic Basin voyages increased barrels in transit.

AC - Oil Market Report - May-2026.pdf

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