The oil price bubble has burst.
That’s what Wood Mackenzie said in an insight statement sent to Rigzone recently, which revealed that the company had cut its Brent oil price forecast to $78 per barrel for next year.
“Wood Mackenzie forecasts Brent averaging $78 a barrel in 2027 and potentially easing to $70 per barrel by Q4 2027, following a U.S.-Iran Memorandum of Understanding that has shifted market sentiment away from a prolonged Strait of Hormuz closure,” Wood Mackenzie noted in the statement.
The company highlighted in the statement that “the pressure to reach an agreement was acute”, and pointed out that, on June 15, U.S. President Donald Trump “acknowledged that U.S. reserves would run out ‘in about four weeks’”.
“Inventories at the Cushing hub had fallen close to the operational floor. Those fundamentals, as much as diplomacy, brought both sides to the table,” Wood Mackenzie said.
The company pointed out that the Memorandum of Understanding gives both parties 60 days to negotiate a comprehensive agreement.
“Both have accepted in principle that the Strait should be reopened, but the gap between acceptance and execution remains wide,” Wood Mackenzie warned.
“Israel’s apparent rejection of restrictions on its ongoing military action in Lebanon adds further uncertainty. Negotiations may need to be extended. They could fail,” it added.
In its insight statement, Wood Mackenzie highlighted that Brent averaged $92 per barrel over the first half of 2026, “buoyed by the elevated prices of March through May”.
“Investor sentiment moved faster than the oil itself,” Wood Mackenzie said.
“In the four weeks to 16 June positioning for higher Brent prices fell by around 80 percent from a five-year high,” it added.
“Wood Mackenzie’s vessel tracking data shows ships of all categories transiting the Strait reached a peak of 35 on 18 June, up from the low teens per day – but still well short of pre-war levels,” it continued.
The company noted in its insight that its revised forecasts of $78 per barrel in 2027, and a potential $70 per barrel by the fourth quarter of next year, “assume Strait transit flows normalize during August”.
“Alternating periods of elevated and depressed prices are likely as demand recovery, inventory rebuilding, and production ramp-up remain out of sync,” it added, warning that “recovery will take months”.
The supply shock removed more than 11 million barrels per day of crude from global markets, according to Wood Mackenzie, which projected in the insight that 70 percent of shut-in volumes could return within three months of the Strait reopening, and that 90 percent could return within six months.
“The final one million barrels per day will take considerably longer,” Wood Mackenzie warned.
“Refining margins tell the same story: better but not recovered. Jet crack spreads remain at almost double pre-war levels despite easing progressively over the past two months,” the company added.
In the statement, Alan Gelder, Wood Mackenzie Senior Vice President, Macro Oils, warned that “a prolonged closure would have pushed Brent well above $150 a barrel”.
“The MoU changed that trajectory, but the full value chain, from wellhead through to Gulf Cooperation Council ports, will take the better part of a year to fully recover,” he said.
“Jet crack spreads running at almost double pre-war levels are the clearest signal that this market has not yet normalized. Getting the barrels back is a different challenge from reaching a deal,” he continued.
Rigzone has contacted the White House, Iran’s Ministry of Foreign Affairs, and Israel’s Ministry of Foreign Affairs for comment on Wood Mackenzie’s insight statement. At the time of writing, none of the above have responded to Rigzone.
In a press note sent to Rigzone back in March, Wood Mackenzie warned that oil could hit $150 per barrel as a “Gulf shutdown of 15 million barrels per day forces demand destruction”.
“While oil reached $150 per barrel in inflation-adjusted terms during the 2022 Russia/Ukraine crisis, this situation could prove more severe,” Wood Mackenzie said in that note.
“Supply volumes at risk this time are dimensionally bigger- and real,” Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said in that note.
“In our view, $200 per barrel is not outside the realms of possibility in 2026,” he added.
To contact the author, email
