Oil Glut Fears Overblown, Top Consultancy Says
FGE NexantECA says up to 75% of pre-conflict oil flows through the Strait of Hormuz could return by year-end, but warns that lower prices in 2027 are not guaranteed due to persistent U.S.-Iran tensions.
A top energy consultancy has pushed back against fears of a looming oil glut, arguing that a significant portion of disrupted supply could return but that lower prices are far from certain. FGE NexantECA, a leading industry advisor, told CNBC that up to 75% of the oil flows that previously transited the Strait of Hormuz before the U.S.-Iran conflict could be restored by the end of this year. However, the firm cautioned that a sustained drop in oil prices into 2027 is not guaranteed, as underlying geopolitical tensions remain unresolved.
The consultancy's assessment challenges the prevailing narrative of an oversupplied market. Before the conflict escalated, FGE had forecast Brent crude in the upper $50s to low $60s per barrel for 2027. That scenario could still materialize, but it hinges on the full normalization of flows through the strategic chokepoint. The Strait of Hormuz handles about a fifth of global oil consumption, and any disruption has outsized effects on global supply. For traders tracking real-time fuel quotes on NowPrice, the return of even partial volumes could ease near-term supply fears, but the risk premium tied to Iran tensions is unlikely to vanish quickly.
Looking ahead, the key variable remains the trajectory of U.S.-Iran relations. FGE's chairman emeritus noted that a durable resolution appears distant, meaning the market may continue to price in a geopolitical risk premium. Traders should monitor weekly U.S. inventory data and OPEC+ production decisions for further clues on supply balances. While the immediate threat of a glut may be overstated, the path to lower prices is fraught with uncertainty, and any renewed tensions could quickly reverse the current easing in supply concerns.