Market Speaks: Observed crude oil stocks fall below 7.9 billion barrels for first time since April 2025
IEA stated in a latest monthly update that benchmark crude prices surged to a two-month high in July as the recovery in oil supplies from the Gulf reversed course following the breakdown of the mid-June Iran-US ceasefire agreement. Expectations of diplomatic progress had triggered steep price declines in June and early July, but a return to hostilities led prices to spike as high as $105 per barrel on 23 July. At the time of writing, with uncertainty again pervasive, North Sea Dated was trading around $92/bbl. Product cracks and refining margins, meanwhile, have continued to rise in August, setting new records in Europe.
After an increase of 3.7 mb/d in June, Gulf oil production rose by a further 2.5 mb/d in July to 23.9 mb/d, still 8.3 mb/d below pre-war levels. Regional exports, including routes bypassing the Strait of Hormuz, fell by a sharp 2.1 mb/d to 15 mb/d after the key passageway was effectively closed again in early July and oil infrastructure and tankers came under attack. Loadings peaked at 20 mb/d at the start of July but dropped to around 12 mb/d later in the month. With an agreement enabling the reopening of Hormuz and unhindered transit through the Bab el-Mandeb Strait still elusive, we have again lowered supply estimates for the rest of the year. Global oil supply is now forecast to fall by 4.3 mb/d in 2026, to 102 mb/d, as growth of 1.4 mb/d from the Americas only partly offsets losses in the Middle East and Russia.
At the same time, our forecast for global oil demand in the second half of 2026 is reduced by roughly 550 kb/d versus last month’s Report, as the continued closure of the Strait of Hormuz disrupts international supply chains and curtails product availability. Elevated fuel prices are putting further downward pressure on oil use. Global oil demand is now expected to decline by an average of 1.6 mb/d this year. Demand is projected to contract by 4.9 mb/d in 2Q26 and 2.8 mb/d in 3Q26, before flipping to growth of 580 kb/d in 4Q26.
Increasingly tight product markets pushed Atlantic Basin refining margins to all-time highs in July as diesel, jet fuel and gasoline cracks surged amid seasonally higher demand, supply shortfalls and depleted stocks. Despite a monthly increase of 1.8 mb/d, global refinery crude throughputs in July remained nearly 5 mb/d below year-earlier levels, with capacity elsewhere in the system currently unable to offset product supply bottlenecks. Seaborne product trade fell in tandem, down 3.8 mb/d y-o-y, even as US exports rose by 700 kb/d. Diesel exports from Russia, the Middle East and Asia were 1.3 mb/d lower y-o-y, equivalent to about 20% of global seaborne trade. Jet fuel exports from these regions fell by around 670 kb/d y-o-y, equal to 34% of global trade.
The global oil balance is now expected to show a deficit of 1.8 mb/d in 3Q26, more than double the estimate of around 800 kb/d in last month’s Report. After some brief respite in June, global observed oil inventories plunged by 69 mb, or 2.2 mb/d, in July, dragged lower almost entirely by a drop in oil on water. By the end of July, observed stocks had fallen below 7.9 billion barrels for the first time since April 2025. Cumulative stock draws between the end of February and the end of July reached 410 mb, or 2.7 mb/d on average.
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