Crude oil futures prices rose in 1H26, driven by geopolitical developments, strong physical market fundamentals, and uncertainties regarding regional oil supply and trade flows. ICE Brent and NYMEX WTI rose by $21.96/b and $20.95/b, respectively, in 1H26 over 2H25, representing an increase of 33.5% and 33.8%. Oil futures markets saw heightened volatility as market participants continuously reassessed geopolitical developments and their impact on global oil supply. Volatility was exacerbated by speculators and money managers, who frequently adjusted speculative positions on shifting expectations for oil prices. Despite considerable volatility, physical market fundamentals remained strong, with uncertainties around regional oil exports and shipping activities supporting spot crude markets. Strong demand for prompt-loading cargoes led to tighter physical market conditions, especially across the Atlantic Basin, boosting demand for replacement barrels.
However, oil futures prices fell in May and June due to expectations of stronger regional oil flows and higher near-term supply, which reduced geopolitical risk premiums. In June, expectations of abundant near-term supply, along with money managers selling the equivalent of about 357 mb between early May and 30 June, exerted a significant downward pressure on prices. However, low global oil stocks and expectations for high refinery demand over the summer driving season continued to support the physical crude market.
At the same time, product retail prices also surged towards the end of 1Q26, amid geopolitical constraints on product supply. In April, global refinery intakes dropped by a massive 7.3 mb/d compared with pre-crisis levels. This decline in global refinery intake was due to significant run cuts in East of Suez amid lower Middle Eastern crude arrivals into Asia. Lower East–West product flows, along with heavy spring refinery maintenance, further contributed to reduced product availability. This exerted upward pressure on product prices, with gains significantly more pronounced than crude prices. This led to refining margins increasing to multi-year highs in April, despite higher feedstock costs. The price responses varied across products. Middle distillates, particularly jet/kerosene, were the most vulnerable due to disruptions in their East–West flow and the partial reliance of Europe and the US on imports. Constrained heavy crude supplies also led to a further decline in gasoil production. In April, US retail prices for jet/kerosene reached over $170/b, 78% higher than in February, while US gasoil prices reached almost $148/b, an increase of 73% from February levels.
The price increase was somewhat more moderate for gasoline, as relatively healthy stock levels minimised immediate supply concerns. However, in May, retail gasoline prices rose again, especially in the US, driven by the shift to summer-grade gasoline and increasing demand during the summer driving season. Midway through 2Q26, product prices declined gradually, in line with an improvement in product balances. This was observed across regions and reflected announcements on easing geopolitical tensions, a limited but notable increase in Asian refinery runs, the end of the heavy refinery maintenance season, and a subsequent recovery of product output in the Atlantic Basin.
In June, US jet/kerosene prices fell to $127/b but remained 29% above February levels, while US gasoil averaged $121/b, up 42% from February. Looking ahead, and as global refinery intakes currently remain nearly 5 mb/d below the 2025 average, product supply is likely to continue to increase, which could further adjust product balances. Nevertheless, product prices are expected to remain well supported with healthy transportation fuel requirements amid the summer holiday travel season.
Source: OPEC