Page 41 - Policy Economic Report -August 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

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. Oil prices traded
in an unusually wide range of $40/bbl, driven by sudden diplomatic pivots on the conflict. 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/bbl on 23 July. 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, 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.

Hedge funds and other money managers raised their speculative net long positions in July, although
positioning varied across markets amid uncertainty over developments in the Middle East, which fuelled
price volatility. Speculative buying was stronger in the ICE Brent market as geopolitical tensions escalated
and money managers positioned for potential oil supply disruptions. Between late June and the week of
28 July, hedge funds and other money managers bought the equivalent of 144 mb across Brent and WTI
futures and options. Buying was concentrated in ICE Brent, where net long positions rose by 232.7% over
the period, while NYMEX WTI net long positions increased by 15.6%.

Crude oil spot prices dropped on average in July, m-o-m, amid elevated volatility in futures markets. This
was despite supportive market fundamentals, including declining global oil stocks, a continued recovery
in global refinery throughput, and renewed geopolitical tensions. Spot prices declined in the first week of
July, extending the sharp drop registered in late June, as expectations of improving crude availability and
higher Middle Eastern exports eased concerns over prompt supply tightness. Selling pressure in futures
markets added to the downward momentum. Moreover, softer buying interest in the spot market
weighed on spot prices.

In July, the ORB value dropped by $6.76/b, m-o-m, to average $82.99/b. The West and North African
Basket components—Bonny Light, Djeno, Es Sider, Rabi Light, Saharan Blend and Zafiro—declined by an
average of $2.81/b, m-o-m, to $82.50/b. Multiple-region destination grades, including Arab Light, Basrah
Medium, Iran Heavy and Kuwait Export, fell by an average of $8.68/b, m-o-m, to $82.59/b. Murban crude
declined by $2.65/b, m-o-m, to average $79.15/b, while the Merey component dropped by $3.77/b to
average $67.36/b.

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