Oil prices have retreated sharply over the past week as hopes of a lasting Middle East ceasefire eased fears of severe supply disruptions.
Crude oil (OIL/USD) traded near $84.23 on Friday, down more than 11% from this month’s peak above $95 and well below the highs seen during the height of concerns over the Strait of Hormuz.
According to Westpac, Brent crude prices have fallen below $100 per barrel as expectations grow that shipping routes will gradually reopen and supply disruptions will ease.
“The Middle East conflict continues under a fragile ceasefire, with expectations of an imminent resolution capping further price gains.”
While oil has pulled back, Westpac cautions that underlying market conditions remain tight.
“Supply remains constrained by production shut ins, infrastructure damage and persistent shipping dislocation, with many vessels avoiding the Strait of Hormuz.”
The bank estimates that cumulative supply losses from Gulf producers now exceed 1 billion barrels, with more than 14 million barrels per day still shut in.
Even so, Westpac expects improving supply conditions and softer demand growth to gradually reduce pressures on the market.
“We therefore expect Brent to average US$87/bbl in Q3 2026,” the bank said, while forecasting prices to ease further to around US$85/bbl in Q4 2026.
Westpac expects oil markets to remain highly volatile in the near term, with prices continuing to react sharply to developments in the Middle East, but believes the broader trend points towards lower prices as shipping and production normalise through 2027.
