Crude After the Strait
The risk premium is gone. The surplus is what remains.
Brent averaged roughly $103 in the second quarter while the Strait of Hormuz was effectively closed to VLCC, Suezmax, and LR2 traffic. The MOU changed that. Tanker transits are moving again. Brent has fallen more than 20% in a month to the low $70s. WTI is consolidating near $68-69.
The balance the war obscured
OPEC+ has approved another 188,000 b/d production increase for next month. Global supply is growing around 2.1 million b/d this year against demand growth of roughly 800,000 b/d. Consensus now points to a surplus in excess of 2 million b/d for 2026. EIA's July outlook has Brent averaging $74 in Q3 and $70 in Q4. Sell-side forecasts cluster lower: J.P. Morgan around $60, ING at $57 for the year.
Our read
The flat-price story is over for now. Earnings move to structure. A surplus of this size pulls the curve toward contango, storage economics come back into play, and value migrates to grade differentials and logistics. Proximity to U.S. Gulf Coast infrastructure matters more than a view on OPEC's next meeting.
This commentary is provided for general information only and does not constitute an offer, solicitation, or recommendation to buy or sell any commodity or financial instrument.