Global oil markets remain heavily influenced by the ongoing Middle East conflict, though the past week has seen limited progress. US-Iran negotiations continue but remain stalled over longstanding disputes, including sanctions relief, military withdrawal, and reparations. Tensions persist, with threats of escalation from both sides and continued regional attacks. Oil prices rose amid these risks but fell slightly after the US cancelled a planned strike; Brent is around USD 110 per barrel and WTI is about USD 108 per barrel. Meanwhile, uncertainty around the Strait of Hormuz persists, with Iran proposing tighter control, potentially further disrupting trade.
On the supply side, global output continues to decline sharply due to the war, with April production down to 95.1 Mn bpd and significantly below pre-war levels. Gulf supply losses are particularly severe, though increased production from the Americas and releases from the US Strategic Petroleum Reserve are partially offsetting shortages. Infrastructure projects, such as ADNOC’s Fujairah pipeline expansion, aim to mitigate constraints, but the IEA still expects significant supply deficits even if conditions improve.
Demand conditions are weakening due to deteriorating global economic indicators. Rising inflation, particularly in the US, and slower growth in China are reducing consumption prospects. Policy signals, such as India encouraging reduced fuel usage, reinforce this trend. The IEA now forecasts a contraction in global oil demand in 2026, with a substantial drop expected in the second quarter.
Refinery activity is also declining. Throughput forecasts have been revised downward due to infrastructure damage, limited feedstock, and trade restrictions. Asia and the Middle East are hardest hit, while China’s refinery utilisation and output have notably fallen.