Author: Prince Agyapong, Energy & Extractives Journalist

Brent crude opened the week of July 6 trading near $72 per barrel, and the prevailing mood across global oil markets is unmistakably bearish. After months dominated by geopolitical risk premiums, supply disruption anxieties, and a partially closed Strait of Hormuz, the narrative is shifting.

The question energy market participants must now answer is whether this is a temporary correction or the beginning of a sustained structural softening in crude prices through the second half of 2026.

The immediate catalyst is familiar: OPEC+ has approved another production increase, a modest 188,000 barrels per day for August, as seven members led by Saudi Arabia and Russia continue unwinding the voluntary cuts that defined the alliance’s supply management strategy since April 2023.

The decision reflects a calculated confidence that Middle East conditions are stabilising sufficiently to absorb additional supply. Saudi exports have climbed back toward pre-conflict levels, and the UAE has restored shipments, a tangible signal that the worst of the Gulf disruption chapter may be behind us.

The contango curve says it all. ANZ’s observation that Brent’s forward curve now sits in contango, where near-term prices trade below future deliveries, is the market’s own verdict on the supply picture: there is more oil available now than the market needs. Traders are actively unwinding the Iran-conflict risk premium that had inflated prices for months, and the reversal is both rational and swift.

Straight of Hormuz Not Fully Over

Yet the Hormuz story is not fully closed. Transits fell to a four-year low of 43 vessels on July 2, down from 53, with Iran-linked vessels still accounting for roughly 60% of crossings. VLCCs are rerouting Gulf crude through Fujairah and Oman anchorages, a workaround that adds cost and complexity without fully resolving the underlying fragility. Normalisation is underway, but it remains conditional.

Downstream, the picture is more nuanced. Jet fuel is the standout performer; the physical crack against Dubai hit a seven-week high of $54.59/b on July 3, driven by westbound cargo flows and Europe’s heatwave firming ICE gasoil. South Korean refiners are maximising jet output; Japan is stockpiling kerosene for winter. In a broadly softening complex, jet fuel and kerosene are the market’s bright spots.

Naphtha is strengthening on expectations of higher Chinese import demand as Beijing moves to maximise gasoline yields ahead of a likely easing of clean-product export curbs. Gasoil tells a split story: European strength is lifting Arab Gulf differentials, but June fundamentals softened with the Dubai crack falling over 11% month-on-month.

The overarching signal from July 6 is one of managed transition, from a crisis-premium market to a supply-driven one. OPEC+ is unwinding carefully. Hormuz is reopening gradually. Refinery downtime is forecast to ease from 11.3 million b/d in June to 9.7 million b/d in July.

The pieces of a more balanced market are assembling, but the risks, as always, skew to the upside. The bear has arrived. Whether it stays depends on what happens next in the Gulf.