Overview
- Global benchmarks have fallen to the low $70s for Brent and below $70 for WTI after the U.S.-Iran interim memorandum and a partial reopening of the Strait of Hormuz eased the wartime premium.
- The reopening has allowed Gulf producers to push more cargoes through the waterway and prompted Saudi, UAE and Kuwait flows to accelerate, adding millions of barrels to near-term supply.
- Market structure has moved from backwardation into contango as front-month contracts become cheaper than later-dated contracts, a sign traders expect a near-term surplus.
- Citigroup and other banks have cut forecasts and warned Brent could fall toward roughly $60 a barrel by year-end if flows hold and demand stays weak, though this is a forecast not a certainty.
- The recovery remains fragile because U.S. and global inventories are unusually low, floating storage and insurance issues persist, and OPEC+ output changes and China demand will determine whether the surplus is temporary or sustained.