UBS/ Global Oil Fundamentals
EIA’s base case: higher peak disruptions, Hormuz closure until late May
The EIA’s May STEO shows higher crude production disruptions in the Middle East compared to April, now estimated at 10.5Mb/d for April (up from 9.1Mb/d). The report assumes the Strait of Hormuz remains closed until late May, with oil shipments improving in June but not reaching pre-conflict levels until later this year. The agency expects global oil inventories to drop by 2.6Mb/d in 2026, with an 8.5Mb/d draw in 2Q and 4.4Mb/d in 3Q26, much larger than last month’s projection forecasting a 0.3Mb/d draw in 2026 (-5.0Mb/d in 2Q26; +0.3Mb/d in 3Q26). Its Brent forecast is at $110 in 2Q26 (vs. April update $115; UBSe $100), falling to $100 in 3Q and $89 in 4Q (UBSe $83/bbl average for 2H26). The Brent-WTI spread peaks at $15 in April and drops to $9 in 3Q. The EIA expects a one-month delay in reopening the strait until late June would increase crude oil prices by over $20 above our current near-term forecast.
Cutting demand growth for 2026
The agency forecasts global demand in 2026 will rise by 0.2Mb/d (UBSe flat), with a 0.4Mb/d reduction compared to its April update, mainly from non-OECD countries. It expects oil demand to rebound next year, but has lowered its 2027 growth estimate by 0.1Mb/d to 1.5Mb/d (UBSe 1.2Mb/d).
Another downward revision to non-OPEC+ supply growth, led by Qatar
Non-OPEC+ supply growth for 2026 was cut to 0.4Mb/d, down 100kb/d vs. previously, with higher US output (+240kb/d) offset by lower Qatar production (-370kb/d). The 2027 estimate rose by 230kb/d due to a lower base in Qatar. US supply forecasts increased to 0.5Mb/d in 2026 and to 0.9Mb/d in 2027 (+20kb/d vs. previously). Rig activity remained weak in April: well drilled -5 m/m, completed +3 m/m and DUCs -11 m/m.
April OPEC+ output down 1.6Mb/d m/m
The UAE’s departure as of 1 May, 2026 was reflected in this update. In April, crude output from OPEC-9 and partners dropped by 1.6Mb/d m/m, with Kuwait down 0.7Mb/d, Saudi Arabia 0.5Mb/d, Iraq 0.4Mb/d, and Russia 0.4Mb/d (to 8.8Mb/d). Output from exempt countries (Iran, Libya, Venezuela) was unchanged as lower Iranian production (-0.1Mb/d) offset gains in Venezuela and Libya. Following the UAE’s exit, EIA projects OPEC spare capacity at 2.5Mb/d in 2027, down from the previous forecast of 3.8Mb/d.