Oil Falls Under $90; Midstream Eyes 2027 Futures Curve

Oil prices fell below $90 a barrel after reports of more cargoes moving through the Strait of Hormuz and rising hopes for a peace agreement. Front-month Brent briefly closed at $87 on Friday and traded in the high-$80s.

Executives at Exxon and Chevron warned in late May that global oil inventories had declined to thin levels, increasing the risk of a sharp price spike. Exxon Senior Vice President Neil Chapman projected that Dated Brent could reach $150 to $160 in stressed scenarios. Chevron’s chief executive cautioned that physical prices could face upward pressure into June and July as buffers shrink.

A divergence developed this year between physical spot prices and futures. Dated Brent, the benchmark for oil available for immediate shipment, reached $144 on April 7 while Brent futures were near $109. The spread narrowed recently, with both trading near $88.

Policymakers have released oil from strategic reserves and eased restrictions on some cargoes to limit price spikes. Former President Donald Trump stated that more than 100 million barrels were moved through the Strait with U.S. military assistance. A drop in Chinese imports and other measures have also been cited as factors that limited larger price increases.

Restoring normal flows through the Strait will require time for vessel repositioning, mine clearance and checks of regional infrastructure. The U.S. Energy Information Administration in June assumed flows would begin to resume slowly in the third quarter and projected that production and trade patterns would not return to normal until early 2027. At recent drawdown rates, releases from the U.S. Strategic Petroleum Reserve would be exhausted around the end of August.

For midstream investors-owners and operators of pipelines, storage and processing facilities-the futures curve is more relevant than front-month volatility. The 2027 futures price for the U.S. benchmark has risen about $15 this year and sits above $70 per barrel. Producers use forward pricing to set drilling and development plans; the EIA forecasts U.S. oil production to increase by roughly 0.43 million barrels per day on average in 2027.

Inventories remain a key variable. If stockpiles continue to fall in the near term, prices could face upward pressure until commercial and strategic reserves are rebuilt. Market participants are monitoring the relationship between Dated Brent and futures for signals about supply stress and drilling incentives.