Brent crude has settled into the low $70s in late July, a world away from the adrenaline-fueled $120+/bbl prints of April when the Strait of Hormuz crisis brought the world's most important oil chokepoint to the brink of closure. The war premium is gone. What remains is a market grappling with the same structural oversupply that existed before the crisis, now compounded by demand uncertainty and a fractured OPEC+.
The Hormuz disruption was real while it lasted. About 10.5 mb/d of Gulf production was shut in during April 2026, according to NAGA and EIA-based analysis. Q2 2026 saw record inventory draws of roughly 8.5 mb/d, turning what had been a projected surplus into a sharp deficit. Brent averaged $106/bbl in May and June. But as diplomatic channels reopened and vessel transits resumed, the supply shock reversed almost as quickly as it appeared.
The pre-crisis fundamentals have reasserted themselves, and they are bearish. The IEA's baseline estimate shows global oil supply growing by 2.1-3.0 mb/d per year in 2025-26, while demand growth is stuck at 0.7-0.9 mb/d. The World Bank projected in October 2025 that the surplus would reach 2.3 mb/d in 2025 and balloon to 4.0 mb/d in 2026 — numbers that have not materially changed despite the Hormuz disruption, because the crisis was too short to alter long-term production plans.
The demand side is split. OPEC remains more optimistic, forecasting 2026 demand growth of 1.3-1.4 mb/d and total global demand of about 106 mb/d. In their view, the market is broadly balanced, with demand for OPEC+ crude at roughly 43 mb/d. The IEA and World Bank see demand growth at roughly half that level, creating a clear path to oversupply unless OPEC+ maintains aggressive production discipline.
The divergence matters because OPEC+ is not a monolith. The alliance enters late 2026 with member countries that have very different breakeven prices and political incentives. Saudi Arabia needs roughly $80/bbl to balance its budget. The UAE has been pushing for higher quotas. Iraq routinely overproduces. If OPEC+ cannot hold the line on production cuts as demand growth disappoints, the surplus forecasts become self-fulfilling.
Non-OPEC+ supply is also a factor. US production has remained resilient despite lower prices, with the Permian Basin still pumping at record levels. Brazilian and Guyanese deepwater production is ramping. The World Bank's $60/bbl baseline for 2026 assumes these trends continue and that OPEC+ makes some cuts, but not enough to clear the market entirely.
One structural risk the consensus may be underweighting: underinvestment in upstream capacity over the past decade. The IEA has warned that global oil investment levels are insufficient to meet medium-term demand even under moderate growth scenarios. If demand surprises to the upside, or if several large producers see unplanned declines, the current surplus narrative could flip quickly. But for 2026, with the Hormuz disruption behind us and production capacity still growing, the weight of evidence points to softer prices.
The current $72/bbl level sits in a messy middle — too low for OPEC+ fiscal comfort, too high for the structural surplus to fully materialize. For procurement teams, this argues for a barbell strategy. Lock in some term volumes at current levels, particularly if contango emerges, but keep significant spot exposure to capture potential downside toward the $60/bbl baseline. The key variable to watch is OPEC+ messaging in September. If the alliance signals additional cuts, the floor hardens around $70. If they allow quotas to rise, the path to $60 opens. Geographic diversification also matters: after the Hormuz scare, buyers should re-evaluate exposure to Gulf-origin crude and increase optionality for Atlantic Basin, North Sea, and US grades. The risk to the bear case is supply-side — if non-OPEC+ production disappoints or if the Strait of Hormuz risk re-escalates, the current $72 level becomes a floor, not a ceiling.