Crude oil markets are entering the second half of 2026 in a persistent surplus. WTI is at $69.70/bbl, down 1.48% on the day, while Brent trades at $73.19/bbl, up 0.05%. The IEA's Oil Market Report projects global oil inventories will build by an average of 930 kb/d in 2026 as supply growth continues to outpace sluggish demand expansion. The World Bank's October 2025 Commodity Markets Outlook had already highlighted growing oversupply, with global output projected to rise by 3 mb/d in 2025 while demand growth remains sluggish.
The supply outlook is firmly weighted to the downside for prices. Global oil supply is projected to reach 104.9 mb/d in 2025 and 106.1 mb/d in 2026, according to the IEA. Non-OPEC+ producers - led by the US, Brazil, Guyana, and Canada - account for the bulk of growth. US crude output is at record levels of approximately 13.6 mb/d. OPEC+ is also adding to the surplus, unwinding voluntary production cuts and adding approximately 310 kb/d of supply in 2025 and 150 kb/d in 2026. The IEA notes that with the rises in global supply expected to considerably outpace demand growth, the stage is set for a further rebalancing of supply and demand fundamentals - but from the buyer's perspective, the rebalancing means lower prices.
Demand growth remains tepid. The IEA forecasts global oil demand growth of only 740 kb/d in 2026, constrained by a challenging economic outlook, trade tensions, and the accelerating uptake of clean energy technologies. The World Bank projects demand at 103.8 mb/d in 2025 and 104.5 mb/d in 2026 - well below the supply trajectory. OPEC forecasts higher demand growth at 1.38 mb/d in 2026 but even its numbers show supply outpacing demand in most scenarios.
Price forecasts reflect this fundamental surplus. The World Bank projects Brent averaging $60/bbl in 2026, down from $68 in 2025. The EIA's Short-Term Energy Outlook sees Brent at $55.08/bbl and WTI at $51.42/bbl for 2026. RSM notes that major independent forecasters project WTI in the low-to-mid $50s. Goldman Sachs maintains 2026 average price forecasts at $56/bbl for Brent and $52 for WTI, expecting prices to bottom around $54 and $50 respectively in Q4 2026 as inventories build across OECD countries.
Geopolitical risks provide a price floor. The Strait of Hormuz situation remains a wildcard that can temporarily spike prices. In April 2026, approximately 10.5 mb/d of Gulf production was reportedly shut in during the Iran crisis. US-Iran ceasefire negotiations are ongoing but face major sticking points, with Tehran reiterating its plan to oversee traffic through the Gulf. Any escalation could temporarily spike Brent above $80. The EIA estimates that prolonged Strait of Hormuz disruption could significantly tighten supply.
The refined products market shows demand weakness directly. RBOB gasoline futures at $2.91/gal, down 4.86% on the day, reflect softer-than-expected summer driving demand. ULSD diesel at $3.22/gal, down 3.20%, signals weakness in industrial activity and freight volumes. These crack spread contractions indicate that the surplus is moving through the value chain, from crude to refined products. Refining margins reached 12-month highs in April-May 2026, but the rally in crude prices in early June squeezed profitability as gasoline, naphtha, and fuel oil cracks weakened.
Natural gas presents a meaningfully different story. Henry Hub is at $3.28/mmBtu, up 3.27% on the day and significantly above the 2024 lows near $2. The EIA forecasts Henry Hub averaging $3.90/mmBtu in 2026. Bloomberg forwards imply prices near $4.50-5.00 by late 2025 into 2026. The natural gas market is fundamentally different from oil: 2024-25 saw very low prices due to oversupply and high inventories, but 2026 pricing is expected to normalize higher as LNG export capacity ramps and US production growth moderates.
TTF natural gas in Europe trades at EUR 43.67/MWh, up 2.61%, reflecting continued sensitivity to LNG flows and storage levels. European gas storage is being monitored closely as winter 2026-27 approaches. Any supply disruption from Russia or Middle East routes is capable of spiking European gas prices significantly, given the region's continued reliance on LNG imports to replace piped Russian gas.
The US-Iran ceasefire negotiations are a critical variable for both oil and gas markets. The situation in the Gulf remains fluid, with both sides signaling progress while fundamental disagreements persist. For oil, a durable ceasefire would remove the geopolitical risk premium, potentially pushing Brent back toward $60. For gas, the impact is indirect but significant through LNG shipping routes and broader Middle East stability.
For procurement teams, the oil market is in a structurally bearish phase with frequent geopolitical spikes. The key strategy is avoiding over-commitment to long-dated fixed-price oil volumes while maintaining enough coverage to avoid being caught short during the inevitable geopolitical spikes. Natural gas, by contrast, is normalizing higher from deeply depressed levels but remains fundamentally well-supplied.
Crude oil buyers should avoid locking in large volumes of long-dated fixed-price barrels at premiums above the $55-65 Brent / $50-60 WTI band. The fundamental surplus provides steady downward pressure on prices, but geopolitical risks require adequate coverage. Recommended approach: use laddered hedging into H2 2026-H1 2027, layering in coverage 10-15% at a time to exploit dips and contango structures. Keep 30-40% of exposure unhedged to benefit from surplus-driven weakness. For diesel and gasoline buyers, monitor crack spreads - current weakness signals softer demand, but refinery maintenance season could tighten supply temporarily. For natural gas buyers, consider securing 50-60% of winter 2026-27 volumes via term contracts or collars around the $3.50-4.00/mmBtu level. Henry Hub at $3.28 offers a reasonable entry point given the EIA's $3.90 average forecast. In Europe, monitor TTF and LNG flows weekly - any supply disruption could trigger price spikes. Diversify gas sourcing to include LNG cargoes where terminal capacity allows. The key risk for H2 2026 is that oil surplus persists while geopolitical risks prevent prices from fully reflecting fundamentals, creating a range-bound market that rewards patience and punishes panic buying.