Oil prices may remain volatile at high levels in the second half of the year.

Recurring shipping route risks and declining inventory buffer capacity Recently, international oil prices have swung rapidly on multiple occasions, primarily reflecting the market’s reassessment of supply disruption risks in the Gulf region. After the U.S.-Iran ceasefire agreement was reached and partial resumption of navigation through the Strait of Hormuz, supply concerns eased and oil prices retreated accordingly. Subsequently, vessel attacks in the Strait of Hormuz and the Red Sea prompted the market to reprice supply risks, driving a swift rebound in oil prices. As negotiations on restoring navigation progress, the risk premium has again receded. The International Energy Agency’s (IEA) July report shows that Gulf-region oil exports rose to 16.1 million barrels per day (bpd) in June—still below the pre-conflict level of approximately 24 million bpd—indicating that maritime safety remains a critical variable shaping supply expectations. Declining inventories further amplify the impact of geopolitical risks. According to data from the U.S. Energy Information Administration (EIA), as of July 31, the U.S. Strategic Petroleum Reserve (SPR) stood at about 305 million barrels—the lowest since 1983. The IEA notes that OECD government petroleum inventories have fallen to their lowest level since December 1990. Should key shipping routes suffer severe disruptions again, short-term supply increases would struggle to fill the gap, pushing oil prices upward once more. Gradual demand recovery and constrained supply elasticity Against the backdrop of globally low petroleum inventories, markets have grown increasingly sensitive to shifts on both the supply and demand sides. Current fundamentals reflect “modest demand recovery alongside limited supply growth.” The IEA forecasts global oil consumption will remain above 100 million bpd in 2026, with global daily oil consumption in October expected to rise by 8 million bpd from its May trough. The summer travel season will boost demand for jet fuel, gasoline, and diesel, keeping certain refined product markets relatively tight and providing temporary support to crude oil prices. On the supply side, weak upstream investment constrains new capacity additions. Wood Mackenzie expects global upstream oil and gas development spending in 2026 to decline for the second consecutive year. S&P Global Commodity Insights data show that seven major oil companies—ExxonMobil, Chevron, Shell, BP, TotalEnergies, Eni, and Equinor—are projected to spend approximately $91–93 billion annually on upstream capital expenditures in both 2025 and 2026—only about 60% of their peak spending level in 2015. Hou Mingyang, Deputy Director of the Strategic Planning Institute at Sinopec Petroleum Exploration and Production Research Institute, notes that oil and gas projects typically require long lead times from investment decision to production startup; complex projects—such as deepwater developments—take even longer, making it difficult to translate investment into large-scale new supply in the short term. Even rising oil prices improving cash flow have not prompted significant increases in upstream investment among many oil companies—including U.S. shale producers—who continue adhering to disciplined capital allocation. Moreover, Middle Eastern oil exporters remain vulnerable to regional instability and maritime security disruptions, while Russian oil exports face constraints from sanctions and limitations on transportation, insurance, and settlement. The combined effect of seasonal demand recovery and limited supply elasticity will underpin oil prices in the second half of the year.

Slightly raising its oil price forecast, Goldman Sachs expects ‘Middle East shipping disruptions to persist until 2027,’ but ‘price gains will be modest.’

Goldman Sachs raised its Brent and WTI crude oil price forecasts by $5 per barrel each, citing expectations that Middle East shipping disruptions will extend into 2027—yet the upward revision remains relatively restrained, given stronger-than-expected market adaptation and continued recovery in Middle East supply. According to Wind Trading Desk, in its latest report released on September 7, Goldman Sachs raised its December 2026 Brent/WTI price forecasts to $85/$80 per barrel, and its full-year 2027 forecasts to $80/$75 per barrel. The report notes that both oil and shipping markets are increasingly pricing in the long-term nature of the Middle East conflict: Brent spot futures have risen to $97, and the market-implied probability of Brent exceeding $100 per barrel by March 2027 has climbed from roughly 6% one month ago to about 25%. Despite extending its assumption on the duration of shipping disruptions, Goldman Sachs kept its price forecast revisions modest. The core reason is that OECD commercial inventories have shown little decline since the outbreak of war, and the global market deficit has narrowed significantly—from approximately 7 million bpd in March 2026 to roughly 1 million bpd in Q3 2026—demonstrating markedly stronger market adaptability than anticipated. Limited price forecast revision: Two key buffering factors Goldman Sachs attributes the restrained magnitude of this price forecast revision to two core factors. First, OECD commercial inventory resilience has exceeded expectations. OECD onshore commercial inventories serve as a key predictor of crude oil prices—and since the outbreak of war, they have shown virtually no notable drawdown. As of late August, Goldman Sachs’ tracked OECD commercial inventory counter stood 119 million barrels above its July supply-demand balance estimate. Globally visible inventories have declined by 543 million barrels since the war began, yet only about 26 million barrels came from OECD commercial storage; roughly 200 million barrels were drawn from OECD strategic petroleum reserves (SPR) and seaborne cargoes, and another ~80 million barrels from China. This highly concentrated depletion in non-commercial categories exerts only a relatively limited direct upward push on recent Brent spot prices. Second, Middle East supply adaptation and recovery continue progressing steadily. Goldman Sachs expects continued expansion of “dark flows,” commissioning of new pipeline capacity by end-2027, and gradual utilization of idle capacity in the UAE and Saudi Arabia—supporting sustained supply recovery across the region. Liquefied petroleum output from the Persian Gulf has rebounded from a low of 14.3 million bpd below February 2026 levels in April to a shortfall of just 8 million bpd by July. Goldman Sachs estimates that by end-2027, effective pipeline capacity bypassing the Strait of Hormuz will increase by 3.8 million bpd—primarily from the UAE’s West-East Pipeline expansion (+1.8 million bpd) and Saudi Arabia’s Yanbu port expansion (+2.0 million bpd).

Ineos sees fading pricing support in Q3 after Middle East conflict-related uptick

15 hours ago

Ineos Group reported declining third-quarter earnings as pricing support from Middle East supply disruptions faded, impacting its petrochemical and polymer businesses. Lower EBITDA resulted from returning Asian imports and high energy costs, while North American margins remained resilient.

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Ineos sees fading pricing support in Q3 after Middle East conflict-related uptick

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