The energy market's centre of gravity has shifted from fear of shortages to oversupply. The prices that were held aloft for four months by the most severe supply shock in history is now back towards pre-crisis levels, and the questions that defined the conflict—including whether the Strait of Hormuz will reopen and whether supply will return and diplomacy hold—are being replaced by harder, more durable questions. These include: How low will prices go? Who absorbs the pain? And which structural changes wrought by four months of disruption prove will permanent even as the physical barrels come back? The ceasefire remains fragile but the market shift, rightly or wrongly, seems more assured.
1. Wall Street calls a $60/bl oil world
Citigroup analysts forecast that Brent crude could fall to $60–65/bl by year-end, recommending investors sell into any summer rallies, with fundamentals rapidly reasserting themselves: shipping flows normalising, Chinese buyers absent, physical crude markets weakening sharply and inventory draws far below expectations. Goldman Sachs projects the global crude surplus will exceed 3m b/d in 2027, while Morgan Stanley—having cut its forecasts twice in two weeks warns of an implied surplus of 4.8m b/d. Brent had already fallen roughly 30% in the second quarter, unwinding all of the war's gains. The Wall Street consensus is now unambiguous: the crisis premium is gone, and the glut that was already forming before February has returned with a vengeance.
2. OPEC+ adds barrels into a falling market
OPEC+ agreed on Sunday to increase output by a further 188,000b/d from August—the fifth consecutive monthly increase—with Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman all participating. One could argue it is a largely a paper formality given actual barrels have been constrained for months by the Hormuz blockade, falling well short of quota, and the constraint is now easing. Saudi Arabia has more than doubled its shipping volume since 17 June compared with the prior three months combined, and Iran has pushed close to 50m bl of crude to market since the naval blockade lifted. Add incremental OPEC+ barrels to that backlog clearing, alongside softer Chinese demand and higher US and Russian exports, and the setup is near-term oversupply regardless of what the quota paper says. The August decision brings the group to within one further hike of fully unwinding the 2023 production cut—a cut that may, in retrospect, have been made redundant by events. Saying that, barrels still need to be put back into the physical oil system and some would argue the glut narrative is premature.
3. The nuclear talks: Progress and peril in parallel
The diplomatic picture underlying the energy market's price recovery is more precarious than futures curves suggest. US envoy Steve Witkoff and Jared Kushner met Qatari Emir Sheikh Tamim in Doha to discuss the progress of negotiations, with Qatar reaffirming its mediating role and the US underscoring support for the diplomatic process. US Vice-President JD Vance has called the talks productive. Iran's position is harder to read: Tehran and Washington continue to disagree on the specifics of what was actually agreed in the 17 June memorandum of understanding (MOU)—on frozen assets, on nuclear inspections and on the sequencing of sanctions relief—with both sides offering materially different accounts of what the other has committed to. The 60-day MOU expires in mid-August. A market that has priced in a permanent de-escalation may be underpricing the probability August brings a renegotiation crisis rather than a final deal. Nevertheless, Iran looks like it will still face challenges to ramp up crude sales.
4. Iran's oil: 40m bl and counting
The speed of Iran's commercial re-entry into global oil markets last week was striking. Iran exported more than 40m bl of oil in the two weeks following the end of the US blockade and is now selling at global market prices—a significant uplift from the discounted rates it was forced to accept during sanctions. General License X, the US Treasury's 60-day sanctions waiver, is best understood not as a simple permit for Iranian oil sales but as a temporary attempt to normalise the entire commercial infrastructure surrounding Iran's energy exports—covering production, shipping, insurance, payments and maritime services, restoring a legal framework for activities that sanctions had pushed into opaque and costly shadow networks for years. The question now is whether banks, insurers and trading houses re-engage fully, or hold back pending greater certainty about the final deal. Their decisions will shape how quickly the full volume of Iranian supply re-enters the market—and therefore how fast prices fall.
5. Canada bets on Asia
Canadian Prime Minister Mark Carney and Alberta Premier Danielle Smith announced plans to build a new 1m b/d oil pipeline from Alberta to Canada's Pacific coast, with construction targeted to begin as early as September 2027 and completion expected by 2032–34 at an estimated cost of C$35–44b ($25–31b). The announcement came as Asian importers seek supply diversification following the Iran conflict, with roughly two-thirds to three-quarters of crude shipped from Canada's existing Pacific coast terminal already going to Asian markets. Carney simultaneously committed to more than tripling Canada's LNG production through five new terminals. The political significance is considerable: the decision represents a clear departure from previous Liberal governments' energy agenda and reflects the economic reality imposed by Trump's trade war, which has accelerated Canada's drive to reduce dependence on the US market. The pipeline's northern route remains constrained by a tanker ban Carney upheld on British Columbia's northern coast—a compromise that may limit the project's full commercial optionality.
6. The pump price problem
The political friction between the White House and the US oil industry over retail fuel prices intensified, and the economics behind it are becoming clearer. The US national average for regular gasoline stood at $3.928/gal as of Wednesday, well above Trump's stated target of around $2.25/gal, though prices have been falling for six consecutive weeks. Citigroup's $60/bl year-end forecast, if realised, would suggest pump prices of roughly $2.50–2.80/gal by Q1 2027 under normal refinery margin conditions—closer to Trump's target but still dependent on the pace of Hormuz normalisation, refinery throughput recovery and whether the DOJ investigation into alleged price-gouging by ExxonMobil, Chevron, Shell and BP produces any tangible outcome. The American Petroleum Institute's response—pointing to normal crude-to-retail lag dynamics—is technically correct but politically unconvincing in a midterm election environment.
7. The $60/bl question for US shale
The US rig count surge of last week—the largest single-week increase since June 2022—is already looking like a capital planning relic of a higher-price world. Those drilling decisions were made months ago at much higher price assumptions, and coincide with WTI trading near $69/bl, roughly $43/bl below its April peak. If Citi's $60/bl forecast materialises, a significant portion of US shale activity—particularly in higher-cost formations outside the Permian core—moves to the margins of economic viability. The irony is structural: the same US shale surge that helped contain the crisis price spike is, in combination with returning Gulf supply, helping to engineer the price collapse that may curtail the next wave of US drilling. The rig count will tell the story over the next 6–8 weeks.
8. What happens when China returns
The most under-examined risk in the current price collapse narrative is what happens when China re-enters the market in volume. China reduced its crude imports to around 7.8m b/d in May—its lowest level in nearly a decade—with that withdrawal making up the majority of the global decrease in crude oil trade and effectively preventing a full-blown price catastrophe during the conflict. JPMorgan expects China to return as a major buyer in August, potentially at levels closer to 11–12m b/d. That demand signal, arriving just as Europe is competing for LNG ahead of winter and just as OPEC+ is adding incremental supply into the market, creates the conditions for a sharp counter-rally against the prevailing bearish consensus. Citi's advice to sell summer rallies may prove correct—or it may prove to be the consensus that gets punished if China returns faster and harder than the models expect.
9. Qatar's structural LNG wound will not heal quickly
QatarEnergy has confirmed that 12mt/yr of its 77mt/yr liquefaction capacity is damaged and potentially unavailable for 3–5 years, with additional risk of delays to the 48mt/yr under construction. Regional hostilities have effectively sidelined more than 80mt/yr of global LNG capacity, and even in optimistic scenarios, markets are unlikely to soften materially until 2028. The oil price may be heading towards $60/bl. The gas market is heading into a different winter entirely—and the structural damage to Qatari infrastructure means the LNG crisis that oil market participants have largely set aside will continue to shape power prices, industrial competitiveness and energy security calculations in Europe and Asia long after the last Hormuz headline has faded