Trading sessions over the past weeks have seen oil prices drop back down to levels last seen before the Iran War began on February 28. They are as far removed as possible from alarmist predictions of $200 per barrel oil prices at the height of the conflict. Past the midway point of the current trading year, and having endured an almighty geopolitical shock to the system, Brent is trading just above $70 per barrel while the WTI's just below it.
Overall, both benchmarks are now down nearly 35% on a three-month basis covering the most stressful flashpoints of the war in the last three months.
We were largely kept there by copious amounts of US crude, especially light sweet crude, out in the market, as well as other sources of non-OPEC / non-Middle Eastern crude from Norway, Canada, Brazil and Guyana. The tenacity of the UAE and Saudi Arabia in moving their crude despite severe disruption in the Strait of Hormuz also helped to a degree.
With the risk premium having receded, a 60-day negotiation between Washington DC and Tehran now underway, and maritime traffic moving a bit more meaningfully through the Strait of Hormuz - attention ought to turn to a normalisation of the market.
Instead, chatter about an oil glut has returned with a vengeance with everyone from the International Energy Agency to Goldman Sachs bringing it into sharp focus for Q1 2027. Is it right to talk about it? Yes. Is it a tad premature? Also, yes!
Normalisation cannot occur in a snap when a fifth of the world's oil supply has been disrupted by the event. Tankers are out of place, cargoes stuck in the Gulf will take time to get going, there are production concerns, especially in Iraq and Kuwait, and infrastructure that's been damaged would need repairing.
Much of this would take much of the remainder of the year to get back on track. That said the UAE's recent exit from OPEC, and the OPEC+ production hike coupled with higher non-OPEC production would put additional barrels on the market. So, oversupply could become a market feature in the face of lower demand late into Q1 2027. However, for this to happen early on in Q1 2027, much would depend on China's intake.
In a sense, had the Iran War not happened that surplus was widely expected late into Q1 2026, rather than potentially a year later which is where the market finds itself. As for 2026 itself, in terms of fresh prospection, Wood Mackenzie identified 23 high-impact wells in 2026. It noted that these wells either have the potential to prove the viability of frontier basins or build upon the success of super-giant discoveries of 2025.
Petrobras's Morpho-1 (800 million barrels of oil equivalent potential) has the potential to open up the Foz do Amazonas basin and Equinor's S-M-1378-1 in Brazil's Santos Basin could prove the viability of pre-salt microbial carbonates, above and beyond BP's Bumerangue discovery.
Finally, before one takes your leave, here's yours truly's latest Energy Connects column on how supermajors are spending their Iran War windfall, and here's one for Forbes on the rise and rise of the Munich-Dresden corridor for energy and industrial startups.
Well that's all for the moment folks! More market musings to follow soon. Keep reading, keep it here, keep it 'crude'!
To follow The Oilholic on Energy Connects click here. To follow The Oilholic on Critical Mass click here.
© Gaurav Sharma 2026. Photo: Oil production site. © Monika Wrangel / Pixabay, May 2015.
.jpg)