Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
Rystad Energy said in its latest forecast the full Middle East regional oil supply will be restored by the end of 2026, with the UAE and Saudi Arabia playing the lead role in the process.
The energy research company said Brent crude was trading around $73 a barrel, near its lowest level in three months, as the oil market prices in a faster-than-expected recovery in Middle East supply.
Rystad Energy now estimates that shut-in production across the Gulf has fallen to 9.6 million barrels per day in mid-June, down from 11.7 million bpd just three weeks earlier.
It has revised its forecast for a full regional supply recovery forward by a full quarter, to the end of 2026.
The UAE is expected to play a central role in the recovery, supported by its export infrastructure, bypass routes and spare production capacity, according to the Rystad note.
The conflict has accelerated the UAE’s shift towards Fujairah as its primary export hub, with ADNOC expanding its Habshan-Fujairah pipeline to lift bypass capacity from 1.8 million bpd to 3.3 million bpd by around 2027, Rystad said.
The UAE’s installed crude capacity of 4.85 million bpd is well above the 3.4 million bpd the country was producing before the conflict, the note said. ADNOC has laid out plans to reach 5 million bpd next year, with longer-term potential of 6 million bpd, according to Rystad.
Restarting shut-in offshore fields is the near-term priority, followed by the Upper Zakum expansion, where contractors were selected earlier this month, the note added.
In a separate commentary, the International Energy Agency said the UAE’s total oil exports rose to 4.3 million bpd in early June, up from 1.9 million bpd in March, taking them to almost 85% of pre-war levels.
The UAE had drawn on storage, pipelines and other infrastructure, as well as alternative shipping routes, to maintain relatively high exports even amid severe disruptions, the IEA said.
The UAE’s 380-kilometre pipeline from Habshan to Fujairah enabled it to export 1.8 million bpd of crude while bypassing the Strait of Hormuz, while the 42-million-barrel Mandous underground storage complex near Fujairah provided additional flexibility.
Rystad said Saudi Arabia’s East-West pipeline, with capacity of 7 million bpd, proved to be the most important single piece of export infrastructure during the conflict. Shipments through Yanbu rose from under 1 million bpd before the conflict to 3.3 million bpd in March and 4 million bpd in April and were on course for a record 4.5 million bpd in mid-June.
“Two million barrels a day came back online in three weeks, and the recovery is spread across the region,” said Aditya Saraswat, MENA research director at Rystad Energy.
“Iran is moving fastest because its shut-in was shorter and upstream damage was limited. Kuwait has already lifted all force majeure notices and is offering July cargoes by tender. Saudi Arabia is on track for a record 4.5 million bpd through Yanbu this month. The supply picture is clearly improving,” Saraswat said.
Rystad said three developments have shifted the supply outlook in quick succession: the preliminary US-Iran agreement signed on June 17, Washington’s decision to grant Iran a 60-day licence to sell oil on international markets, and restart timelines from producers across the Gulf that came ahead of earlier estimates.
Together, these developments have led Rystad to expect total outages to fall below 2 million bpd by the end of the third quarter, with the region returning to pre-conflict output by December.
“The 60-year record of Middle East production is consistent on one point: the region has recovered from every prior supply shock, including the Arab oil embargo, the Iran-Iraq war and the Kuwait invasion, and output has reached a new high after each one,” Rystad said.
Rystad said the 2026 conflict is the largest volume shock the region has recorded, but the recovery is already under way. “Whether it completes on the current timeline depends on how quickly the strait gets back to normal traffic,” Rystad noted.
