A “Mini-Glut” From the Gulf
The reopening of the Strait of Hormuz following the June 17 U.S.-Iran ceasefire has unleashed a flood of previously stranded crude onto world markets. Brent crude fell below $71 a barrel in early July, returning to pre-war prices and dropping more than 38 percent from its wartime peak above $126 a barrel on April 30. At least five supertankers carrying 10 million barrels of Saudi oil exited the strait from the Ras Tanura terminal, according to Reuters, with Saudi Aramco switching to spot pricing to accelerate sales into Asia. Morgan Stanley reported that 35 oil and gas tankers exited the strait in a single day, marking a return to pre-war levels, according to Al Jazeera. aljazeera.com aljazeera.com detroitnews.com aljazeera.com
The U.S. Energy Information Administration on Monday raised its global oil production forecast, now expecting worldwide output and trade flows to rebound to near pre-conflict levels by year’s end. eia.gov
Refining Margins Hit Records
As crude prices crater while fuel demand stays strong, refining margins have surged. The benchmark U.S. 3-2-1 crack spread climbed above $60 per barrel — a record high — while the gasoline refining spread hit $58.09 per barrel on July 6. Crack spreads have roughly doubled since early June, when they sat around 45 percent of crude’s value; they recently reached 70 to 75 percent. seekingalpha.com mansfield.energy finance.yahoo.com
The windfall stems from months of inventory depletion during the war. U.S. crude stocks fell for seven consecutive weeks through early June, dropping to their lowest since 2018. Goldman Sachs warned in May that global oil inventories were approaching an eight-year low, while S&P Global noted gasoline crack spreads were on track to approach or exceed the record levels of the 2022 energy crisis. spglobal.com investing.com detroitnews.com wsj.com
How Long Can the Boom Last?
Analysts are cautioning that the refining bonanza may be fleeting. Reuters reported on Tuesday that the windfall could prove short-lived as the “mini-glut” of released Gulf barrels fades and crude prices gradually recover. Already, oil prices have rebounded from their lows, jumping after the U.S. revoked a general license authorizing sales of Iranian crude and a Saudi-flagged tanker was damaged near the strait. reuters.com reuters.com
Societe Generale said the oil market is expected to shift from deficit into surplus in late 2026 and through 2027 as supply growth outpaces demand. The Council on Foreign Relations warned that Hormuz traffic still faces a long road to recovery, even as the ceasefire agreement itself shows signs of unraveling. reuters.com cfr.org
“I would therefore describe the outlook as a temporary surplus risk under high political uncertainty,” one analyst told Al Jazeera, “rather than a stable oil glut”. aljazeera.com
