OPEC+ Resists Coordinated Cuts as Oil Market Remains Structured for 2026 Surplus

The war in the Middle East has triggered the largest supply disruption in the history of the global oil market. With crude and oil product flows through the Strait of Hormuz plummeting from around 20 mb/d before the conflict to a trickle, Gulf countries have cut total oil production by at least 10 mb/d to manage the crisis. This is not a minor hiccup; it is a severe, geographically concentrated shock that has already plunged global oil supply by 1.2 mb/d in January.

The worst is not yet over. The International Energy Agency projects that supply losses will increase dramatically, with global oil supply set to plunge by another 8 mb/d in March. This staggering contraction is driven by the ongoing curtailments in the Middle East, which will partly offset higher output from non-OPEC+ producers like Kazakhstan and Russia. The immediate fear is of a prolonged closure of the Strait of Hormuz, a vital chokepoint, which has sent prices soaring. Brent crude has surged over 50% from the start of the year, hitting $108.78 per barrel earlier this week.

Yet, this disruption is a temporary spike, not a permanent shift in the underlying balance. The scale of the cut is immense, but it is concentrated in one region and hinges on the duration of the conflict. The broader market still expects a structural surplus for 2026, with global supply forecast to rise by 1.1 mb/d on average. The current price surge reflects acute fear and logistical paralysis, not a fundamental change in the long-term supply-demand equation.

The Underlying Fundamentals: A Market Built for a Surplus

The current price spike is a stark anomaly against a backdrop of ample supply. The pre-existing market structure was one of surplus, a condition that has only been temporarily masked by the Middle East crisis. Global oil demand is forecast to grow by 850 kb/d in 2026, a solid expansion. Yet supply is set to outpace it decisively, with output projected to rise by 2.4 mb/d this year. This gap between supply growth and demand growth is the fundamental imbalance that will reassert itself once the geopolitical disruption eases.

This surplus was already visible in the data. The International Energy Agency noted that an oil surplus was visible in January data and is likely to persist. That month saw global oil supply plunge by 1.2 mb/d due to weather and outages, but even that contraction was not enough to offset the underlying structural trend. Preliminary figures show global stocks surged by another 49 mb in January, adding to the 477 mb build in 2025. The market was already oversupplied before the war, and the recent price rally has not yet reversed that inventory accumulation.

The supply side is holding steady, not tightening. Non-OPEC+ production, including U.S. shale, is holding firm, with U.S. shale output steady at 9.2 MMb/d. OPEC 9 output also remained stable at 29.1 MMb/d in February, with Saudi Arabia making a calibrated increase to reassure markets. There is no sign of a major coordinated supply cut from the group; their actions have been about managing flows, not reducing total barrels. This stability in the non-disrupted producers ensures that ample supply will be available to flood the market once the Middle East flows resume.

The bottom line is that the market is built for a surplus. J.P. Morgan Global Research sees Brent crude averaging around $60/bbl in 2026, a forecast underpinned by these soft fundamentals. The current spike is a reaction to acute fear and logistical paralysis, not a change in the long-term supply-demand equation. When the Strait of Hormuz reopens and Gulf production returns, the floodgates of surplus supply will open once more, putting significant downward pressure on prices. The recent price surge is a temporary distortion; the underlying balance points firmly to lower levels.

The Path Forward: Scenarios for Price and Balance

The outlook for oil is now a tug-of-war between two powerful, opposing forces. On one side is the massive, temporary supply shock from the Middle East conflict. On the other is the persistent structural surplus baked into the market's fundamentals. The resolution of this conflict will determine which force wins.

The paramount risk is the duration of the war. A rapid political resolution could see prices fall sharply as the floodgates of surplus supply reopen. Conversely, a prolonged conflict may sustain prices above $100 for an extended period. Analysts at Goldman Sachs have warned that in risk scenarios with lengthier disruptions, prices could stay elevated through 2027. The recent surge to $108.78 per barrel for Brent crude shows the market's sensitivity to escalation, with prices spiking above $119 earlier this month on deepening fears.

Against this volatility, the baseline forecast points firmly to a return to surplus. J.P. Morgan Global Research sees Brent crude averaging around $60/bbl in 2026. This bearish view is underpinned by the expectation that global supply will outpace demand, with a surplus projected to persist. Their forecast is highly dependent on the conflict ending; it assumes that the current massive production cuts in the Middle East are temporary and will unwind. The bank also notes that an oil surplus was visible in January data and is likely to persist, a condition that will reassert itself once the geopolitical shock eases.

Key watchpoints will signal which path the market is taking. The first is the resumption of shipping through the Strait of Hormuz. Any tangible progress on this front would be the clearest catalyst for a price correction, as it would allow Gulf production to return and relieve the acute supply squeeze. The second is any response from OPEC+. While their actions have been about managing flows so far, a sustained disruption could prompt a coordinated supply cut to stabilize prices. However, the market's structural surplus makes such a move less likely unless the shock proves more persistent than currently modeled.

The bottom line is one of high uncertainty. The current price spike is a direct reaction to acute fear and logistical paralysis. Yet, the underlying balance points to lower levels. For now, the market is being held aloft by the shock. Once that shock fades, the flood of surplus supply is poised to drive prices back down. The path forward hinges on a single variable: how long the Middle East conflict lasts.