The U.S.-Iran conflict has changed how the oil market defines a deliverable barrel, according to Ole Hvalbye, partner at ABG Sundal Collier. He says the market increasingly separates paper spare capacity from what can actually reach buyers, while global inventories have already drawn down and refiners face a products bottleneck.
Spare capacity now means less on paper
Production capacity is of limited value if crude cannot be processed, transported, or delivered to the consumer, Hvalbye told Rigzone. He expects the market to increasingly distinguish between spare capacity on paper and capacity that can actually be delivered.
According to Rigzone: "The oil market is not permanently short, but it is permanently less trusting". Hvalbye added that the result is unlikely to be one permanently high oil price, but rather a higher value placed on secure logistics, inventories, refining flexibility, and diversified supply.
Hormuz flows have adapted, but at a cost
Before the conflict, the Strait of Hormuz carried around 20 million barrels per day of crude and products, Hvalbye said. Overall Gulf exports ran near 14 million barrels per day in August and early September, though volumes fell further as escalation continued.
Hvalbye estimated that around 500 million barrels crossed the region with tanker transponders shut off between June and August, aided by military escorts, ship-to-ship transfers, inventory releases, and alternative pipeline routes. He called this proof that markets always find a way, even during the conflict, though he warned the workaround is less transparent, costlier, and harder to insure.
Products, not crude, are the tighter bottleneck
Hvalbye pointed to a bottleneck concentrated more in refined products than in crude itself. He cited IEA estimates that global refinery runs were 4.2 million barrels per day below last year in August. Combined Gulf and Russian diesel and gasoil exports ran 1.6 million barrels per day below February this year. Those regions previously supplied almost 45% of global seaborne diesel trade.
Global observed oil inventories have fallen by 507 million barrels since February, including 95 million barrels in August alone, a cumulative draw Hvalbye said equals around five days of total global demand. He added that each additional outage now matters more as that buffer shrinks. Still, he stressed that oil does not need to trade above $100 a barrel, since higher prices tend to draw their own cure through demand destruction and new supply.
Demand forecasts diverge sharply
Agencies disagree on how deep the demand hit will run. Hvalbye noted the IEA expects global demand to fall by 2.5 million barrels per day in 2026, while OPEC expects growth of 0.38 million barrels per day, a gap of roughly three million barrels per day. Both, he said, expect a rebound of around 2.4 to 2.6 million barrels per day in 2027 and view the current shock as cyclical rather than permanent.
Naeem Aslam, CIO at Zaye Capital Markets, said Russian and Middle Eastern refinery disruption has pushed diesel prices to record levels, leaving crude able to soften even as downstream fuel costs stay elevated. He noted OPEC+ kept October production requirements unchanged from September while trimming its 2026 demand growth outlook to 380,000 barrels per day. That gap against IEA's more cautious view, Aslam said, explains why Brent can hold above $100 without generating a straight line rally.
Source: Rigzone
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