Brent crude hovers near three-month lows as Gulf oil production rebounds faster than expected, with Iran, Saudi Arabia and the UAE driving recovery.
Brent crude prices have retreated to around US$73 per barrel, their lowest level in nearly three months, as energy markets increasingly price in a faster-than-expected recovery in Middle Eastern oil supply. The shift comes after a series of diplomatic and operational developments that have significantly improved the region’s production outlook, easing fears of a prolonged supply disruption.
According to Rystad Energy, total shut-in production across the Gulf has declined sharply to 9.6 million barrels per day (bpd) in mid-June from 11.7 million bpd just three weeks earlier. The recovery gained momentum following a preliminary agreement between the United States and Iran on 17 June and Washington’s decision to temporarily suspend Iranian oil sanctions for 60 days.
The rapid improvement has prompted Rystad to bring forward its forecast for a full regional supply recovery by an entire quarter, with pre-conflict production levels now expected to be restored by the end of 2026.
The market’s outlook has shifted significantly as producers across the Gulf resume operations sooner than initially expected. Rystad now expects total regional outages to fall below 2 million bpd by the end of the third quarter, with production returning to pre-conflict levels by December.
A key factor behind the recovery is the resilience of Saudi Arabia and the United Arab Emirates, which together account for roughly 65% of current regional output. Both countries managed to maintain exports during the conflict by relying on alternative pipeline routes that bypass the Strait of Hormuz.
Iran has recorded the fastest recovery pace. With limited damage to upstream facilities and the lifting of the US naval blockade, the country has rapidly restored production capacity. Kuwait and Iraq, however, face a slower path due to their dependence on mature reservoirs and limited export alternatives outside Hormuz.
The speed of the recovery has reassured markets that supply shortages may be shorter-lived than previously feared, contributing to the recent decline in oil prices.
The US Treasury’s decision to suspend Iranian oil sanctions until 21 August has opened the door for a substantial production increase.
Rystad estimates Iran’s oil output could rise from approximately 2.4 million bpd currently to 3.1 million bpd by August. If sanctions relief remains in place beyond the temporary period, production could reach 3.3 million bpd by the end of the year, surpassing pre-conflict levels.
Historical precedent supports the possibility of a rapid recovery. Following the 2016 nuclear agreement, Iran increased production by nearly 1 million bpd within a year.
However, analysts caution that sustaining long-term growth may prove more challenging. Iranian oil fields face naturally high decline rates, while years of sanctions have limited access to foreign investment, technology and expertise.
Although domestic contractors have continued development efforts since international oil companies exited the country in 2018, significant structural improvements may require renewed foreign participation.
Saudi Arabia and the UAE appear best positioned to capitalize on the improving market environment.
Saudi Arabia’s East-West pipeline has emerged as a strategic asset, allowing exports to continue through the Red Sea port of Yanbu despite disruptions in the Gulf. Shipments through Yanbu are expected to reach a record 4.5 million bpd in June, highlighting the importance of alternative export infrastructure.
Meanwhile, the UAE is accelerating efforts to expand exports through Fujairah. ADNOC is upgrading the Habshan-Fujairah pipeline, which is expected to boost bypass capacity to 3.3 million bpd by 2027.
The UAE’s exit from OPEC production limits also provides greater flexibility. With installed capacity already exceeding pre-conflict production levels, the country has outlined plans to reach 5 million bpd next year and potentially 6 million bpd over the longer term.
Despite the positive supply outlook, the Strait of Hormuz remains the critical factor determining the pace of recovery.
Storage facilities across the Gulf are estimated to be only 50% to 60% full. While producers have relied on inventories to maintain exports during disruptions, that buffer is finite. If tanker traffic through Hormuz fails to normalize quickly, producers may be forced to curb output once again, delaying the region’s full recovery into 2027.
For now, oil markets appear increasingly confident that the worst of the supply shock has passed. Yet the sustainability of the recovery will depend not only on diplomatic progress but also on the restoration of normal shipping flows through one of the world’s most important energy corridors.
As production steadily returns and geopolitical risks ease, the balance between recovering supply and global demand will shape the next phase of oil price movements.
Read More News on Latest Malaysia
Read More News on Business News Malaysia
Read More News on SG Business News
Read More News on World Future TV
MGB Bhd secures a RM44.7m contract in Saudi Arabia for villa development, enhancing its regional…
The FBM KLCI retreated as rising oil prices, renewed geopolitical tensions and concerns over AI…
Bukit Mertajam MP Steven Sim calls for investigation into human trafficking following a police raid,…
Bursa Malaysia fined CFM and its eight directors RM2 million for listing breaches, underscoring stricter…
Lembaga Tabung Haji has improved its financial position through recovery efforts, enhancing asset quality and…
Schroders Capital's Q3 2026 outlook highlights private markets' resilience and the need for selective, deliberate…
This website uses cookies.