OPIS Energy Macro Outlook: August

Monthly average of major oil futures contracts:

• WTI (NYMEX) $79.40
• Brent (ICE) $83.80
• Dubai $71.30 (Average of the high and low of the front-month contract)

Uncertainty surrounding the conflict between Iran the U.S. has created price volatility with Brent in July reaching more then $100/bbl after starting the month well below the $80 level.

The pause in military strikes and Houthi threats to shipping through the Bab al-Mandeb Strait were key factors in creating a wide range in oil futures prices during the most recent month.

OPIS anticipates the conflict to remain unresolved for at least the next three months with periods of escalation and de-escalation that will impact prices throughout that timeframe. While the June memorandum of understanding has essentially been torn up, we believe that any negotiations between the U.S. and Iran can return to the MoU as a framework.

Global liquids balances are expected to remain tight through the next three months as we expect supply to contract by 4.7 million b/d in 2026 as normalization through the Strait of Hormuz is likely to take longer, however we anticipate a strong rebound in production in 2027 as Persian Gulf nations should be able to ramp up production quickly once the logistical stains ease.

Should the conflict go beyond mid-October and there is no meaningful recovery in Persian Gulf production, another coordinated stock release from the International Energy Agency will be more likely.

OPIS expects global demand in 2026 to decline by approximately 2.2 million b/d this year before rebounding in 2027 by 2.7 million b/d. The recovery in demand is expected to be led by Asia. Mainland China had seen a sharp drop in imports in June as refiners deferred purchases due to high prices and compressed margins. We expect China and other Asian nations to return as significant buyers once geopolitical tensions and price volatility eases as Chinese refiners look to rebuild commercial inventories and other governments in Asia look to bolster strategic stockpiles.

–By Denton Cinquegrana, dcinquegrana@opisnet.com

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