KAMCO: Kuwaiti crude prices recorded their sharpest decline in July

A report by KAMCO Invest indicated that crude oil prices remained elevated above $85 per barrel, amid the continued closure of the Strait of Hormuz and discussions regarding the possibility of the US government imposing stricter sanctions on Iran and its trading partners. Regarding the closure of this vital trade corridor, several chief executive officers of oil companies noted that while actual crude prices in the region remained at reasonable levels, shipping costs rising to approximately $20 million per voyage added a price premium borne by buyers. This also meant that refined products could not exit the region, exerting downward pressure on crude oil prices, in contrast to the upward trend in refined product markets.

Market conditions remained characterized by tightness rather than the usual price declines seen in late summer, primarily driven by heightened geopolitical risk premiums stemming from the ongoing conflict between the United States and Iran. Persistent bottlenecks in actual shipping movements, affecting the two main corridors—the Strait of Hormuz and the Red Sea—along with stalled peace talks between the US and Iran, prevented any significant price decline. These factors overshadowed negative developments regarding inventories, as well as demand forecast cuts by both the International Energy Agency (IEA) and OPEC in their monthly reports.

The US government recently announced a new package of sanctions targeting 60 entities linked to Iran, aimed at curbing Iranian oil exports. However, the impact of these measures on prices remained extremely limited. Meanwhile, reports showed that US forces successfully secured the transit of over 660 million barrels of oil through the Strait of Hormuz since May, confirming that this vital sea lane continues to operate partially. Although the continuation of oil flows under military protection limits the risk of a complete supply disruption, shipping activity remains below normal levels. Analyst estimates suggest that restoring only 50 to 60 percent of the volumes that previously transited before the war could revive oversupply expectations, potentially pushing Brent crude prices back toward $70 per barrel.

On the demand side, the IEA once again lowered its oil demand forecast for 2026 in its latest monthly report. The agency now expects global oil demand to decline by 1.6 million barrels per day (bpd) over the year, a reduction of 510,000 bpd compared to its previous forecast. The agency attributed this downward revision to the closure of trade routes and higher prices, which have placed pressure on consumption levels. Similarly, OPEC lowered its forecast for annual oil demand growth to 580,000 bpd, marking its fourth consecutive downward adjustment.

On the supply side, crude oil production rose sharply by 1.2 million bpd in July 2026, with Kuwait, Saudi Arabia, and Iraq accounting for most of this increase, while Nigeria reduced its output. The United States also recorded marginal production increases for three consecutive weeks.

Monthly Trends: Crude oil prices have remained elevated since the beginning of the month, trading near $90 per barrel. Prices started the month with a strong upward wave during the first half, before recording a marginal decline in the second half. Regarding monthly price trends, the average crude oil price continued its decline in July 2026.

Brent crude futures prices fell for the third consecutive month, dropping 2.1% to an average of $83.4 per barrel. Kuwaiti export crude experienced the sharpest decline among the three major oil benchmarks, falling 11.1% to an average of $82.0 per barrel in July 2026. Meanwhile, consensus forecasts rose broadly for the next three quarters, reflecting price increases recorded over the past few weeks. Consensus estimates for Brent crude in the third quarter of 2026 stood at approximately $83.6 per barrel, up from $80.0 per barrel in the previous month.

Global oil demand: OPEC has once again lowered its forecast for global oil demand growth this year, marking the fourth consecutive month of downward revisions. The organization now expects demand to grow by 0.58 million barrels per day in 2026, down from its previous estimate of 0.78 million barrels per day, bringing average global demand to 105.7 million barrels per day.

Global oil supplies: Global oil supplies continued to recover in July 2026, albeit at a slower pace and from a much lower base than markets had anticipated a month earlier. Data from the International Energy Agency showed that global oil supplies rose by 2.4 million barrels per day in July 2026, reaching 101.5 million barrels per day. However, this remained 6.3 million barrels per day below levels recorded a year ago, as approximately 8.3 million barrels per day of Gulf region production remained offline.

Gulf states’ production increased by an additional 2.5 million barrels per day during the month, reaching 23.9 million barrels per day, but it remained 8.3 million barrels per day below pre-war levels. In contrast, the region’s exports, including shipments routed through alternative paths around the Strait of Hormuz, fell sharply by 2.1 million barrels per day to 15 million barrels per day, following the effective closure of the strait in early July and attacks on oil infrastructure and tankers.