Oil Market Report - June 2026

• Global oil demand is forecast to decline by 1.1 mb/d y-o-y in 2026. This represents a downgrade of 700 kb/d compared with our May Report, as 2Q26 deliveries plunged by 5 mb/d y-o-y in the face of higher fuel prices and disruptions to product availability. We see growth rebounding to 2 mb/d in 2027, as a normalisation of trade flows, lower oil prices and an improving economic outlook contribute to the recovery.

• Global supply is set to fall by 3.9 mb/d to 102.4 mb/d in 2026 before rebounding by 8 mb/d to 110.3 mb/d in 2027. In May, output declined to 94.5 mb/d, down 600 kb/d m‑o‑m and 13.6 mb/d below pre‑conflict levels. While the US‑Iran interim agreement paves the way for a rebound in Middle East exports, operational and political constraints, including prolonged demining and unresolved transit arrangements, leave downside risks to the outlook.

• Refinery crude throughputs are forecast to contract by 2 mb/d in 2026 to 82 mb/d, led by a 4.7 mb/d y-o-y decline in 2Q26. Notwithstanding the interim peace deal, 2026 crude runs estimates are cut by 370 kb/d on the back of much steeper cuts in 3Q26 estimates across China, the Middle East, Eurasia and non-OECD Asia. Runs are expected to rebound by 3.1 mb/d in 2027, as crude supplies normalise to an average of 85 mb/d.

• The decline in global observed inventories accelerated in May, to 143 mb (-4.6 mb/d) from 74 mb (-2.5 mb/d) in April. This lifts the average pace of stock draws since the start of the Gulf conflict to 3.8 mb/d, of which 2.4 mb/d for crude and 1.4 mb/d for products. OECD government inventories fell by 163 mb (-1.8 mb/d) over the same period to their lowest level since December 1990 as the pace of emergency stock releases accelerated.

• North Sea Dated crude oil prices collapsed by more than $40/bbl to around $82/bbl during May through mid-June, as oil demand faltered and on building speculation that the United States and Iran were getting closer to agreeing the terms of a peace deal. Investor exchange holdings slumped in parallel, as positive price momentum reversed sharply and traders reduced positions in the face of extreme price volatility and higher exchange margins.

An interim agreement between the United States and Iran to end the war in the Middle East could pave the way for a reopening of the Strait of Hormuz and a lifting of a US blockade on Iranian oil traffic. The biggest breakthrough in negotiations since the start of the conflict sent oil prices tumbling to their lowest levels since early March. While details of the deal, that is scheduled to be signed on 19 June in Switzerland have yet to be clarified and several issues remain outstanding, it is an encouraging step forward. Prices had already retreated from recent highs as market tensions eased on a surge in Gulf exports at the start of June, an acceleration in IEA government stock releases and weaker demand. ICE Brent futures traded at around $81/bbl at the time of writing, $37/bbl below an early April peak but still about $20/bbl higher than at the start of the year.

If the deal holds, exports and production from the Gulf should see a gradual recovery – not least because Iranian oil exports can fully resume once the US blockade is lifted. Shipments through the Strait were already rising sharply in early June, supported by ship-to-ship transfers in the Gulf of Oman, lifting total flows from a May low of 9.6 mb/d to around 12 mb/d. A full recovery will not be immediate, however, as mines will have to be removed from the main shipping lanes and supply chains will take time to normalise. Overall, global oil supply is expected to fall by 3.9 mb/d on average in 2026 to 102.4 mb/d. Gulf supply losses will be partly offset by continued gains from non-OPEC+ producers. Robust growth from the Americas, along with steep US SPR releases, boosted Atlantic Basin crude exports to markets East of Suez since the start of the war by 3.5 mb/d. At the same time, crude imports into China and Japan, in particular, have declined sharply, with each falling by around 40% – or nearly 6 mb/d combined. Lower refinery crude runs in China, the Middle East, Eurasia and elsewhere in Asia, down by more than 5 mb/d y-o-y in 2Q26, transmitted this supply shock into product markets.

End-user demand is down by a similar amount, and we now expect deliveries to decline by 5 mb/d y-o-y in 2Q26 and by 1.1 mb/d for 2026 as a whole. This is a downgrade of 700 kb/d compared with last month’s Report, as the impacts of nearly four months of disruptions spread across products and regions.

Despite the significant reductions in demand for crude oil and refined products, the buffers in the system continue to erode at a record pace. Global observed oil stocks have declined by 3.8 mb/d on average since the start of the war, with a sizeable draw of 143 mb (-4.6 mb/d) in May, according to preliminary data. Further declines in the coming months could still take global oil stocks to historic lows before the market balance shifts to surplus towards the end of the year.

Our first look at 2027 balances shows a significant overhang emerging next year. Global oil demand is projected to rise by a relatively modest 2 mb/d to 105.3 mb/d. By contrast, oil supplies look set to surge by around 8 mb/d to 110 mb/d. This may provide a welcome respite to the market and an opportunity to replenish depleted inventories, or to build new strategic reserves, as countries review their energy strategies and policies in response to the crisis.