Analysis: Supply Surge Met Muted Crude Demand in June


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Crude oil futures tumbled 20% in June, marking their 
steepest monthly losses since the pandemic-induced global demand collapse of 
March 2020. The selloff erased nearly all wartime increases as Middle East 
exports recovered and a dtente between the U.S. and Iran alleviated supply 
concerns.

   The two countries, which had been at war since February 28, signed in 
mid-June a memorandum of understanding as a first step toward a lasting peace. 
In it, they agreed to extend for 60 days a ceasefire in place since April to 
allow negotiations for a peace deal, and to lift their respective blockades of 
the Strait of Hormuz.

   The reopening of the waterway freed up vast volumes of crude oil stranded on 
tankers in the Persian Gulf and allowed for the return of Middle Eastern 
production which was forced shut by the three-and-a-half-month-long Iranian 
blockade.

   Iranian crude exports resumed at full capacity following the June agreement, 
aided by the lifting of the U.S. naval embargo on Iranian shipping and the 
suspension of sanctions on Iranian oil sales. The combined measures released 
nearly 50 million bbl of additional supply into the market.

   Shrinking geopolitical risk premium and a broader gush of oil out of the 
Persian Gulf consequently sent crude futures crashing in the second half of 
June. Refined product futures, which soared in tandem with crude oil during the 
war, eased by much less.

   Brent's front-month contract closed June trading up $0.44 bbl, or 0.6%, from 
where it ended February 27, the last trading day before the start of the 
U.S.-Israeli war on Iran.

   RBOB and ULSD futures, in contrast, ended the month at 45% and 24% above 
pre-war levels, respectively. This unorthodox price development also meant 
soaring crack spreads. The 3:2:1 crack versus Brent rocketed to $57.92 bbl on 
the last day of June, from an already elevated $42.58 bbl at the beginning of 
the month. For comparison, the differential hovered in the $21-25 bbl range in 
June of 2025.

   These price divergences came as the return of crude oil supply was 
immediate, while refined fuels supply continued to be tight after months of low 
global refining rates caused by the supply disruption. Demand is set to pick 
up, driven by both an end to availability issues, high refining margins and a 
need to restock depleted inventories, but will do so with some delay to 
restarting crude oil flows.

   Crude prices can in July also expect respite from scheduled emergency 
stockpile releases. So far, close to 90 of the planned 172 million bbl have 
been released from the U.S. SPR. The drop in refined product prices, on the 
other hand, will likely be feathered by the seasonal summer demand peak.

   The race between returning Middle Eastern oil supply and recovering global 
demand will define much of July's price movements. The gap between the two will 
shrink, but for now, low product inventories and scarce supply caused by the 
global refining lull, combined with a temporary crude glut, will translate into 
hefty refining margins as fuels demand outruns an eventual crude demand 
resurgence.

Monthly Futures Recap                        June 2026
                Brent ($/bbl)   WTI ($/bbl)  ULSD ($/gal)  RBOB ($/gal)
Close June 30   72.92           69.50        3.3168        3.0144
Open June 1     92.58           88.50        3.5448        3.0547
m/m             -19.66          -19.00       -0.228        -0.0403
m/m (%)         -21.2%          -21.5%       -6.4%         -1.3%

    




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