The oil market is telling two distinct stories, and future pricing depends upon which one prevails. In the short run, energy markets are leaning hard on drawdowns, run cuts, refined product inventories and demand destruction in order to keep prices in check. If the situation continues unchanged, falling inventories could drive prices skyward by midsummer. On the other hand, the market faces an oversupply situation as soon as the Strait of Hormuz reopens and a flood of Mideast oil comes back on the market, according to Fitch Ratings – and the financial markets are pricing in this scenario. As ever, the outcome depends upon the timing of a ceasefire deal between the U.S. and Iran, and on how much oil can slip through the blockades in the meantime.
Given the current shutdown in the strait, the inventory picture is not favorable for low pricing. The U.S. Energy Information Administration (EIA) announced Tuesday that OECD oil inventories are on track to reach their lowest level since recordkeeping began in 2023, and will keep dropping until December even in the event of a Hormuz restart.
“Under our assumptions, we expect global oil inventories will fall by an average of 6.3 million b/d in 2Q26 and by 7.6 million b/d in 3Q26,” EIA wrote, adding that this will likely drive Brent back up above $100 per barrel over the summer. The high price of crude and expanding government interventions are also driving down demand, and EIA forecasts that the world will consume about 1.1 million barrels per day less than it did in 2025 – a rare decline not seen since the pandemic (and a meaningful contribution to global CO2 emissions reduction).
The real question for market pricing, according to Kpler research director Matt Smith, is when the U.S. will cease exporting crude and refined products abroad. With China’s refining sector implementing steep run cuts and ceasing product exports, undersupplied fuel markets have come to the U.S. Gulf Coast to source export cargoes instead. Asian refiners have come looking for crude, too. “The US is putting all these barrels onto the market, but US inventories are getting depleted,” said Smith in a recent interview. “When the US stops sending those barrels out, that’s when kind of the music stops.”
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Final crude estimate for June 5 week.
Total crude draw of 12.91 million bbls.
SPR release of 7.9 million bbls.
Commercial crude draw of 5.01 million bbls. pic.twitter.com/R6zbhgLJCZ— HFI Research (@HFI_Research) June 8, 2026
Smith notes that the White House has had excellent results in talking down the price of oil futures with peace-deal announcements, making analysts who previously forecast $110+ crude decide to go quiet for reputational reasons – but on a rational basis, he sees skyrocketing prices as more likely than ever. “I don’t know who needs to take up this mantle of calling for $200 oil. I’ll pick it up, you know, I’ll take an additional hit of being wrong,” Smith said.