Israel-Iran conflict couldn't change trajectory of global oil flows: S&P

S&P expects global oil supply to exceed demand by 1.2 million b/d in H2 2025 and Brent to average $50-$60 per barrel as OPEC+ unwinds cuts and demand growth remains weak

The decision by OPEC+ members to unwind existing production cuts has led to oil supply growing quickly and prices easing after the Israel–Iran conflict, S&P Global Commodity Insights said on Wednesday.

 

S&P expects crude supply to outstrip demand by 1.2 million barrels per day (b/d) in the second half of 2025. In contrast, demand had exceeded supply during the same period in 2024. The surplus is expected to continue into 2026, though at a lower figure of 800,000 b/d.

 

“The underlying fundamentals of the global oil market remain profoundly unchanged. There will be more oil supply coming from the Middle East in July. Meanwhile, global demand growth remains weak. In other words, there is plenty of oil available,” Jim Burkhard, vice-president and global head of crude oil research, S&P Global Commodity Insights, said in a statement.

   

Even during the conflict, all signs pointed to more supply coming from the Middle East, not less, the analysis said. OPEC+ countries began visibly increasing production, in line with their plans to unwind cuts on an accelerated timeline. By mid-June, Saudi Arabian crude and condensate exports had increased by nearly 700,000 b/d—close to its stated monthly target.

 

There remains over 4 million b/d of unused production capacity in the Persian Gulf region. If the tentative peace between Iran and Israel holds, S&P has flagged the possibility of trade and investment sanctions being eased or removed. This would pave the way for additional Iranian supply entering the market. 

 

Prices to moderate

 

As a result of these trends, S&P's base case projections expect dated Brent prices to be in the $50–$60 per barrel range, while West Texas Intermediate (WTI) is forecast in the upper $40s to upper $50s per barrel, later this year and into 2026. Brent is a blend of crudes from the North Sea and serves as a global benchmark, while WTI is extracted in the US and is the benchmark for the American market.

 

Partly due to this downward pressure on prices, the United States remains on track to register its first year-on-year oil production decline in nearly a decade—despite former US president Donald Trump’s call to “drill baby drill”. Total US crude oil and condensate production, including offshore, is expected to fall by 600,000 b/d from mid-2025 to the end of 2026.

 

Meanwhile, global demand continues to grow at a weak pace. “Annual global total oil (liquids) demand growth for 2025 continues on track to be the weakest since 2001, excluding the economic downturn during the 2008–09 financial crisis and the COVID-19 pandemic in 2020, at 870,000 b/d. Demand growth in 2026 is expected to be around the same level,” S&P said.