Middle East Gulf oil flows recover strongly; Brent forecast lowered but still above the forward curve
AI summary card
Middle East Gulf oil flows recover strongly; Brent forecast lowered but still above the forward curve
Barclays' energy commodities chart book this week shows that Hormuz-related oil flows have recovered to about 80% of pre-war levels, but only about two-thirds of pre-war levels after adjusting for the share of tankers entering the Gulf, while maintaining long recommendations on gasoil crack spreads and Brent calendar spreads.
- For the week ended June 26, 2026, the average net exports of crude oil and refined products through the Strait of Hormuz were 13.3 mb/d.
- Including rerouting via Yanbu and Fujairah, implied oil flows recovered to 80% of pre-war levels; after adjusting for the share of tankers entering the Gulf, the recovery is about two-thirds of pre-war levels.
- Combined managed money net positioning in Brent and WTI is at the 4th percentile since 2014, indicating speculative positioning remains low.
- Barclays lowered its Brent forecast to $96/b in 2026 and $85/b in 2027, but it remains above the forward curve implied average price.
Report interpretation
Overview
This report is Barclays' weekly energy commodities chart book, with core updates covering prices, futures curves, speculative positioning, inventories, refining crack spreads, shipping flows, US weather, and natural gas indicators. The title emphasizes a "strong recovery," mainly referring to the clear rebound in Middle East Gulf-related oil flows in the week after the US-Iran MoU was signed, though the author also notes that part of the recovery came from the release of stranded floating storage in the Gulf, and the share of tankers entering the Gulf remains below normal.
Core views
The report's core views are: first, Middle East Gulf and Hormuz-related oil flows have recovered quickly, but the true extent of supply recovery needs to exclude the impact of floating storage release and below-normal inbound Gulf traffic; second, speculative net long crude positioning remains at historical lows, and the implied volatility premium in oil prices has fallen significantly; third, although Barclays lowered its Brent price forecast, its 2026 and 2027 forecasts remain above the forward curve implied average price; fourth, the report maintains its long trade recommendations on the ICE gasoil crack and the Brent Dec26-Dec27 calendar spread.
Analysis framework
The report uses a chart book approach, combining high-frequency indicators such as oil flows, inventories, futures curves, speculative positioning, crack spreads, natural gas inventories, LNG exports, and weather degree days to assess the recovery in energy commodities supply and demand, risk premiums, inventory pressure, and trading opportunities.
Methodology notes
Uses shipping flows, inventory changes, and futures curves together to assess crude market balance.
The report uses Kpler's Hormuz export data, rerouted terminal flows, global and US inventories, and Brent/WTI futures curves together to avoid judging supply-demand recovery based solely on a single price move.
Measures market crowding by the historical distribution position of combined net speculative positioning in Brent and WTI.
The report notes that combined net positioning in Brent and WTI is at the 4th percentile since 2014, indicating that speculative long participation remains low, which may affect price elasticity and the scope for subsequent position rebuilding.
Observes the energy risk premium through the premium of oil implied volatility relative to equity market volatility.
The report states that OVX minus VIX excess implied oil volatility has fallen to only 0.5 standard deviations above the average since 2020, indicating that the conflict-related risk premium has already declined.
Expresses views on refining margins and term structure through refined product crack spreads and cross-year Brent spreads.
The report maintains long positions in the ICE gasoil crack and the Brent Dec26-Dec27 calendar spread, reflecting trading views on middle distillate margins and forward structure, respectively.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Brent crude oilThe report's main subject for price forecasts and term structure observations.
- Strengths
- Barclays' 2026 and 2027 Brent forecasts remain significantly above the forward curve implied average price, and market risk premium has fallen after the recovery in Middle East Gulf oil flows.
- Weaknesses
- The forecast has already been lowered, and the actual extent of supply recovery is affected by floating storage release and the low share of tankers entering the Gulf.
- Comparison
- The 2026 Brent forecast of $96/b is above the forward implied $81/b; the 2027 forecast of $85/b is above the forward implied $71/b.
- Risks
- Uncertainty over implementation of the US-Iran MoU, renewed disruption to Hormuz transit, inventories building more than expected, or weaker demand.
- WTI crude oilUsed together with Brent to observe speculative positioning, futures curves, and US inventory indicators.
- Strengths
- Combined speculative net positioning in Brent and WTI is at a historical low, leaving room for potential position rebuilding.
- Weaknesses
- Changes in US inventories, production, net exports, and demand may weaken price support.
- Comparison
- The report presents both ICE Brent and NYMEX WTI futures curves to compare pricing in the global and US crude markets.
- Risks
- Volatility in US commercial inventories, Cushing inventories, US crude production, and refined product demand.
- ICE gasoil crackOne of the long trade recommendations explicitly maintained in the report.
- Strengths
- Middle distillate inventories and refining margin indicators remain a focus of the report, with both the latest price and entry price at $33.4/b.
- Weaknesses
- No positive return has been shown since entry, and crack spreads are easily affected by diesel demand, refinery runs, and regional inventories.
- Comparison
- The report also tracks the European gasoil crack, ARA gasoil inventories, and Singapore middle distillate inventories.
- Risks
- Rising middle distillate inventories in Europe and Asia, weak demand, or changes in crude costs compressing the crack spread.
- Brent Dec26-Dec27 calendar spreadA cross-year Brent spread long recommendation explicitly maintained in the report.
- Strengths
- If medium-term supply and demand remain tight or the forward curve strengthens again, this spread has room to recover.
- Weaknesses
- The latest price of $2.79/b is below the $4.67/b entry price, so the trade is currently in an unfavorable position.
- Comparison
- The report uses front-month to fourth-month spreads and the forward curve to observe term structure, complementing the cross-year spread recommendation.
- Risks
- Improved long-term supply expectations, inventory accumulation, or downward revisions to demand expectations causing the spread to weaken further.
- Natural gas and LNGThe report's chart book covers Henry Hub, TTF, US and EU natural gas inventories, US LNG exports, and weather degree days.
- Strengths
- Inventories, LNG exports, and weather demand indicators can be used to track gas price seasonality and supply-demand balance.
- Weaknesses
- The text summary does not provide a clear directional trading recommendation for natural gas.
- Comparison
- The report separately presents the NYMEX Henry Hub and ICE TTF curves to compare the US and European natural gas markets.
- Risks
- Weather deviations, changes in the pace of inventory injections or withdrawals, LNG export flow volatility, and changes in power fuel substitution.
Key data
- Hormuz Net Exports13.3 mb/dAccording to Kpler data, for the week ended June 26, 2026, average net exports of crude oil and refined products (including LPG) through the Strait of Hormuz were 13.3 mb/d.
- Oil Flow Recovery Including ReroutingAbout 80% of pre-war levelsIncluding the effect of bypassing the strait via the Yanbu and Fujairah terminals, the report believes implied oil flows recovered to 80% of pre-war levels last week.
- Recovery After Adjusting for Inbound Gulf TrafficClose to two-thirds of pre-war levelsBecause the share of tankers entering the Middle East Gulf remains relatively low, the report adjusts the true oil flow recovery to about two-thirds of pre-war levels.
- Share of Tanker Traffic Entering the Gulf36%The report notes that the share of tanker traffic entering the Middle East Gulf last week was 36%, and part of the strong recovery came from the release of stranded floating storage in the Gulf.
- Combined Net Position in Brent and WTI4th percentile since 2014Managed money combined net positioning in Brent and WTI remains at a historical low, indicating that speculative positioning is not crowded.
- Excess Implied Oil Volatility0.5 standard deviations above the average since 2020OVX minus VIX has fallen significantly, indicating that the conflict-related oil volatility risk premium has declined.
- Brent Forecast$96/b in 2026; $85/b in 2027Barclays lowered its Brent forecast, but it remains above the forward curve implied $81/b in 2026 and $71/b in 2027 at the time of writing.
- Trade RecommendationsMaintain long ICE gasoil crack; maintain long Brent Dec26-Dec27 calendar spreadThe latest ICE gasoil crack and entry price are both $33.4/b; the latest Brent Dec26-Dec27 spread is $2.79/b versus an entry price of $4.67/b.
Impact & implications
In terms of investment implications, the report conveys a combined signal of "supply shock easing but risks not fully gone." The recovery in Middle East Gulf oil flows reduces the risk of an extreme supply disruption, and the decline in the oil volatility premium also points to easing market panic; however, the low share of tankers entering the Gulf, distortions from floating storage release, and geopolitical uncertainty mean the quality of the recovery still needs further verification. Barclays' forecast remains above the forward curve, and together with low speculative positioning, supports its decision to maintain selected long energy commodities trade recommendations.
Risks
- The recovery in Middle East Gulf oil flows may be exaggerated by floating storage release and may not fully represent stable new supply.
- The share of tankers entering the Middle East Gulf remains low; if shipping confidence is insufficient, the recovery may reverse.
- There are execution and durability risks around the US-Iran MoU and broader geopolitical easing.
- Although the Brent forecast is above the forward curve, it has already been lowered, reflecting downside pressure on fundamentals or the risk premium.
- Low speculative positioning may provide room for rebuilding positions, but it may also reflect a lack of confidence in the demand or supply outlook.
- Inventories, refining crack spreads, natural gas weather demand, and LNG export data may all show high-frequency volatility.
What to watch
- Whether Kpler's crude oil and refined product exports through the Strait of Hormuz remain sustainably above around 13.3 mb/d.
- Whether the share of tankers entering the Middle East Gulf continues to recover from 36%.
- Whether rerouted flows through Yanbu and Fujairah are maintained, or fall back as transit through the strait normalizes.
- Whether managed money net positioning in Brent and WTI rebounds from the 4th percentile since 2014.
- Whether OVX minus VIX excess implied volatility continues to decline or widens again.
- Changes in crude inventories globally, in the US, in China, and at Cushing.
- ICE gasoil crack, European gasoil inventories, and refined product inventories in ARA and Singapore.
- US natural gas inventories, LNG exports, Henry Hub and TTF futures curves, and US weather degree days.