International Oil Prices Post Largest Q2 Decline Since 2020
0xBroomberg
International oil prices posted their steepest quarterly decline since early 2020, with Brent falling 38.4% in Q2, as shipping through the Strait of Hormuz resumed faster than expected — flipping the market from deep shortage to a looming glut that Goldman Sachs and Morgan Stanley now warn is imminent.
How big was the drop?
NYMEX August crude fell 31.4% for the quarter, settling at $69.50/barrel; Brent August crude fell 38.4%, settling at $72.92/barrel.
In June alone, WTI and Brent dropped 20.4% and 20.8% respectively — nearly one-fifth wiped out in a single month.
This means → the last time oil fell this hard in a quarter was Q1 2020, when the pandemic crushed demand overnight. This time the driver is different: supply swung from shortage to surplus.
What happened at the Strait of Hormuz?
The Strait of Hormuz — the narrow passage connecting the Persian Gulf to open water, carrying roughly one-fifth of the world's seaborne oil — is seeing shipping recover rapidly.
Bloomberg, citing Kpler data, reported about 24 commercial vessels transiting both ways on Monday; on Tuesday a supertanker reappeared in the Persian Gulf after large tankers had been absent during the blockade.
StoneX analyst Arlan Suderman noted that a supertanker sailing into the Gulf, not just out, is a key signal. Combined with Saudi exports via the Red Sea, global supply is "approaching rebalancing."
In plain terms = the bottleneck was "oil can't get out." Now the biggest ships are heading back in — the transport risk is unwinding.
What are Goldman Sachs and Morgan Stanley saying?
Goldman's co-head of global commodities research, Samantha Dart, wrote that the situation should normalize by end of July; once Hormuz traffic is fully restored, the market will price in a supply glut.
Morgan Stanley raised its implied 2027 global oil surplus forecast to 4.8 million barrels per day, citing faster-than-expected Hormuz recovery.
This means → the bank had initially forecast a 2026 full-year surplus of 2–3 million b/d, but the blockade temporarily reversed that into a deep shortage. The pendulum is now swinging back toward surplus — faster.
Morgan Stanley cut its Brent targets: Q4 2026 from $80 to $75/barrel, year-end 2027 from $80 to $70/barrel.
Where does U.S. production stand?
EIA data show U.S. crude output hit 13.93 million b/d in April — a monthly all-time high, up 216,000 b/d month-on-month.
Three key basins ramped simultaneously: Texas at 5.83 million b/d (highest since Nov 2025), New Mexico at a record 2.37 million b/d, and North Dakota at 1.13 million b/d.
This means → while Hormuz recovery brings overseas supply back online, U.S. domestic output is also setting records. These two supply forces stacking is the fundamental basis for the banks' glut warnings.
Why is natural gas moving the opposite way?
NYMEX August natural gas rose 13.5% for Q2, settling at $3.275/MMBtu — the largest quarterly gain since Q4 2024.
In plain terms = oil and gas have different supply-demand structures. Crude took the full force of the Hormuz reopening; natural gas has its own seasonal demand support. The two diverged sharply this quarter.
What is the market watching for in the second half?
The central question has shifted from "will supply be disrupted again?" to "when does the surplus actually materialize?"
Goldman's time anchor is end of July — if Hormuz traffic normalizes fully by then, surplus becomes the dominant pricing narrative.
This reflects a fundamental shift in pricing logic: the first half traded on geopolitical risk premium; the second half will trade on fundamental surplus discount. That inflection point is the key pricing node for oil through year-end.
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