The oil market has moved from fearing shortages to pricing in a very different future
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A faster-than-expected recovery in global oil supplies is easing fears of a crude oil shortage.
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Brent crude oil fell from $126 to $73 as Gulf producers increased production.
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Wall Street is lowering its oil price forecasts as supply recovers and demand softens.
Oil market recovers from fear supply shock worrying about too much crude oil.
International Brent crude oil futures It was trading around $73 a barrel early Tuesday. The rate is roughly back to pre-war levels after hitting $126 in April as the conflict in Iran raised fears of a major disruption to global oil flows.
The reason for the collapse in prices is simple: Supply is recovering faster than expected in the market, which is facing demand concerns ahead of the latest sale.
“There is a growing expectation that the global oil market will be well supplied through 2027,” Warren Patterson, ING’s head of commodity strategy, wrote in a note Monday. he said.
Patterson said oil is priced at around $70 per barrel with a “near-zero geopolitical risk premium.” Patterson added that expectations for a 2027 surplus will weigh on sentiment as markets are forward-looking.
This is not just about the US-Iran preliminary agreement or increasing vital tanker traffic. Strait of Hormuz, a quarter of global seaborne oil trade.
Rystad Energy estimated that around 2 million barrels per day of oil production had been restored in the Gulf over the past three weeks as producers brought fields back online.
“The supply picture is clearly improving,” Aditya Saraswat, Rystad’s director of MENA research, said in a note last week.
There are also signs of improvement in shipments from Saudi Arabia and Kuwait. Rystad said that Saudi Arabia is on track to achieve record exports through the Red Sea terminal in Yanbu, while Kuwait has lifted its force majeure notices.
Rystad now expects regional production to return to pre-conflict levels by December rather than the first quarter of 2027.
This rapid recovery is prompting Wall Street to rethink oil’s outlook.
Earlier this month, Goldman Sachs lowered its 2026 fourth-quarter Brent forecast from $90 per barrel to $80, and its 2027 average forecast from $80 to $75 per barrel.
Morgan Stanley also cut its Brent forecasts, lowering its outlook for a barrel from $85 to $80 in the fourth quarter through 2027. JPMorgan also expects Brent to average $80 a barrel in the fourth quarter and extend its decline to an average of $64 in 2027.
But supply isn’t the only reason Wall Street is trending further bearish.
Last month, Goldman warned: weak demand It has become a major downside risk for crude oil, pointing to declining fuel consumption in China and parts of Europe. The bank also sees a long-term demand risk electric vehicles.
