EIA slashes oil price forecasts as Middle East supply recovers

Discounts on Russia's flagship Urals crude have widened to more than $10 per barrel against dated Brent for deliveries to Indian ports, as the return of Middle Eastern oil supply and weakening demand from Asian refiners leave Russian sellers scrambling for buyers.

Steep Discounts Mark a Sharp Reversal

Urals cargoes for August delivery to India have recently traded at discounts of $10 a barrel or more, close to their widest levels and similar to those seen before the Iran conflict earlier this year, according to Reuters ↘ 1.43%, citing three trading sources familiar with the matter. The widening marks a dramatic reversal from March, when Russian crude commanded premiums of $4 to $5 per barrel above Brent as the Middle East war disrupted Gulf exports.reuters+1

The price of Urals loaded at Russia's western ports averaged just $41.66 per barrel in the first three days of July, according to Argus Media data cited by Bloomberg — less than half the level recorded at the peak of oil market turmoil in April.caspianpost+1

Gulf Exports Resume, OPEC+ Pumps More

The discount widening coincides with a recovery in oil flows from the Persian Gulf following a U.S.-Iran memorandum of understanding signed on June 17 that ended the closure of the Strait of Hormuz. Shipping activity through the strait has shown improvement, with maritime analytics firm Kpler noting more vessels entering the Gulf than departing it in recent days.foley+1

The United Arab Emirates raised crude output above 3.8 million barrels per day in June — its highest since April 2020 and above pre-war levels — after leaving OPEC+ production quotas in May. OPEC+ members agreed on Sunday to raise output by a further 188,000 barrels per day in August, the fifth consecutive monthly increase. Saudi Arabia's steep cut to its August official selling price for Arab Light crude to Asia — an $11 reduction, the largest in more than two decades — further underscores the competitive pressure facing Russian barrels.cnbc+1

India's Sourcing Options Multiply

Indian refiners, once heavily reliant on discounted Russian crude after Western buyers shunned it, now have more alternatives. The U.S. Energy Information Administration said Tuesday it expects most crude production and trade patterns to return to near pre-conflict levels by year-end, cutting its 2026 Brent price forecast to $82 from $95 per barrel.marketwatch

The EIA's revised outlook points to inventory builds in the fourth quarter and into 2027. "Next year, we expect that rising oil production will result in the market shifting back to the pre-conflict state of oversupply," the agency said.marketwatch