Oil Shockwave: Middle East Crisis Sends 2027 Prices Into Orbit
– The deteriorating oil crisis in the Middle East is gradually pushing up oil price expectations not only for this year but also for 2027 ahead, with market participants worried about the viability of Gulf exports even if the current double blockade ends.
– Some 11 million b/d of production is currently shut across the Middle East, with most oil producers reaching tank-tops and unable to store more in their systems; these high inventories would take at least 2-3 months to clear.
– Future oil price expectations keep on rising as countries like Iraq or Kuwait are unlikely to return to pre-war capacity in 2026; according to Wood Mackenzie Iraq would need at least 9 months to do so due to reservoir constraints.
– The December 2026 contracts for Brent and WTI currently trade at $91 per barrel and $85 per barrel, respectively, well above the market’s initial $55-60 per barrel expectations driven by this year’s unrealized oversupply.
– Chevron’s CEO Mike Wirth stated that oil supply shortages would soon start appearing around the world as national strategic reserves get gradually depleted, first in Asia and then spreading into Europe.
Market Movers
– UK oil major BP (NYSE:BP) is reportedly considering divesting part or all of its operations in the UK North Sea, potentially fetching up to $3 billion, as new CEO Meg O’Neill seeks to pay down its debt.
– Brazil’s state oil company Petrobras (NYSE:PBR) announced the signing of an agreement with Shell, ONGC and Brava Energia to buy out its partners from the Argonauta field ringfence, taking full 100% control of the 0.7 billion-barrel Jubarte field.
– Mexico’s state oil company Pemex has reported a $2.6 billion quarterly loss in Q1 2026, despite improved refining that lifted its runs to 1.14 million b/d and stagnant upstream production.
– Spanish oil major Repsol (BME:REP) is reportedly in the final stage of selling a 49% stake in its renewables portfolio to the UAE’s Masdar for $1 billion.
– US LNG developer Caturus Energy finalized the acquisition of South Texas upstream assets from SM Energy for a consideration of $950 million, boosting its gas portfolio by 60,000 net acres with some 250 MMCt/day of output.
Tuesday, May 05, 2026
The fight for the Strait of Hormuz has once again turned kinetic, with U.S. forces seeking to tear open Iran’s chokehold of the waterway, in turn triggering Iranian strikes on ships in the area and UAE infrastructure. However, with the US signalling that the ceasefire is still in effect, Brent slid back to $110 per barrel, until physical shortages trigger further spikes toward $120 per barrel further down the line this week.
Hormuz Deadlock Drags on Despite Trump Pledge. US President Trump has promised to start freeing up some of the 2,000 ships stranded in the Persian Gulf, saying the effort would be a humanitarian gesture for tankers from countries not involved in the US-Iran war, prompting a threat from Tehran to stay away from the Hormuz.
Iran Attacks UAE Refinery and Ships. Following news of the US firing on Iranian forces and sinking six small boats along Iran’s coast, the fragile ceasefire in the Gulf was on the brink of collapsing after a refinery in the UAE’s Fujairah reported a missile strike and subsequent fire whilst the Barakah tanker was targeted, too.
OPEC+ Pretends That Nothing Happened. Led by Saudi Arabia and Russia, the core seven members of OPEC+ agreed on a 188,000 b/d production increase for June 2026, slightly lower than the 206,000 b/d hikes announced for April and May, reflecting the May 1 departure of the United Arab Emirates from both OPEC and OPEC+.
IEA Pins Its Hopes on Methane Cuts. The International Energy Agency claimed that global gas supply could be boosted by 200 bcm/year by curbing methane emissions from oil and gas production as well as tamping down on non-emergency flaring, estimating the oil industry’s 2025 methane emissions at 124 million tonnes.
Trump Ratchets Up Pressure on Embattled Cuba. Concurrently to the ongoing crisis in the Middle East, the Trump administration has announced sweeping sanctions on Cuba’s energy and metals sectors, allowing US officials to freeze assets of anyone deemed to be providing material support to the Havana government.
Shell Cuts Down on Med Exposure after Canada Deal. UK-based energy major Shell (LON:SHEL) is reportedly considering a partial sale of some of its East Mediterranean gas assets, potentially the 3.7 TC Aphrodite field offshore Cyprus, with firm interest expressed by Arcius, the joint venture of BP and Abu Dhabi’s XRG.
White House Allows Temporary Flaring from Wells. The US Environmental Protection Agency (EPA) released a guidance document that allows oil producers in the Permian basin and other shale plays to continue ‘temporary’ flaring (for up to 30 days) after a May 7 deadline set by the Biden administration’s methane regulations.
California’s Offshore Crude Is Back in Demand. US oil major Chevron (NYSE:CVX) is seeking to re-route crude produced from two offshore platforms recently restarted by Sable Offshore (NYSE:SOC) to its 285,000 b/d El Segundo refinery, seeking to boost imports of local crudes amidst disruptions to Middle Eastern supply.
Beijing Strikes Back Against US Sanctions. China’s Commerce Ministry announced blocking measures to counter the OFA listing of Chinese private refiner Hengli Petrochemical and 4 smaller Shandong teapots, formally forbidding any domestic companies from complying with them under threat of legal risks.
California Probes Trump’s Offshore Moves. The California Energy Commission announced that it had opened an investigation into the Trump administration’s agreement with Golden State Wind, an offshore wind developer, to cancel their wind leases in the state in return for a $120 million government payout.
Japan Starts Buying Russian Oil Again. Japanese refiner Taiyo Oil is set to receive a cargo of Russian crude oil produced at the Sakhalin-2 project in Russia’s Far East, Japan’s first delivery since June 2025 and only the second since sanctions were introduced in late 2022, potentially testing the limits of the US’ Sakhalin waiver.
Tensions Flare Up in Southern America. The tension-heavy dispute between Guyana and Venezuela about the Essequibo region, believed to be a geological continuation of Venezuela’s heavy oil basins, is set to reignite again as the International Court of Justice started hearings on the century-old border dispute this week.
Beijing Opens Up Rare Earth Exports to the US. Chinese authorities seem to have eased rare earth export controls ahead of the May 15 Trump-Xi meeting, allowing for 60 tonnes of yttrium oxide – a key component in aerospace and chipmaking – to be shipped to the United States, a volume 50% larger than the last 12 months combined.
By Tom Kool for Oilprice.com
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