Monday Macro View: Why Oil Prices Are Not Rising ?

The previous week has been eventful for oil prices. Despite a dramatic escalation in the Iran–Israel conflict, crude markets remain subdued. Brent traded within a narrow band in the low $80s, with WTI hovering around $77–78. As I post this article prices have actually started to come down with Brent at $73 and WTI at $70. This price resilience in the face of geopolitical risk might seem counterintuitive, but it is not unanticipated. As we noted in our last Monday Macro View , the recent run-up in prices had more to do with five structural and geopolitical forces—OPEC+ underperformance, falling inventories, U.S.–Iran diplomatic failure, tariff shifts, and speculative repricing—than the direct impact of Middle East instability. The latest developments reinforce that assessment.

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While Israel’s aerial strikes did hit critical energy infrastructure inside Iran—including damage to the South Pars gas complex and the Fajr-e-Jam refinery —none of these events have so far impaired international oil supply. South Pars, though massive in scale, is fundamentally a gas asset, with its output servicing Iran’s domestic market and some linked refining capacity. The damage, while significant for Iran’s internal energy balance and economic resilience, has not removed barrels from the global market. As long as critical oil infrastructure—terminals, pipelines, offshore platforms—remain untouched, risk premia in crude benchmarks will stay capped. It is the potential, not the realization, of disruption that continues to define market psychology.

Which brings us to the more important structural question: why prices won’t rise meaningfully from here . Structurally, the case for sustained price upside remains weak. According to the IEA’s latest monthly report , world oil demand is now forecast to grow by 720 kb/d in 2025, slightly lower than previous projections due to weaker-than-expected deliveries in the United States and China during the second quarter. Demand growth in 2026 is expected to remain muted at 740 kb/d, weighed down by a slowing global economy and accelerated uptake of clean energy technologies. These revisions reinforce the idea that while absolute demand continues to rise, the rate of growth is losing momentum.

Supply, by contrast, is rising more decisively. In May, global oil supply increased by 330 kb/d, reaching 105 mb/d, which is 1.8 mb/d higher year-over-year. This growth was evenly split between OPEC+ and non-OPEC+ producers, driven in part by the unwinding of voluntary output cuts. For the full year 2025, global supply is projected to increase by another 1.8 mb/d, led by non-OPEC+ gains of 1.4 mb/d. An additional 1.1 mb/d is expected in 2026. These are not hypothetical increases—they reflect active upstream additions already underway, including in North and South America.

This imbalance is visible in inventories. Global observed oil stocks have risen by an average of 1 mb/d since February, with May alone accounting for a build of 93 million barrels. OECD industry stocks fell slightly, but this was more than offset by crude builds in non-OECD countries. The data indicates that the market is now structurally long, with a forward trajectory of growing surpluses.

Even refinery activity, which tends to lag broader trends, is increasing modestly. Global refinery throughputs are forecast to rise by 460 kb/d in both 2025 and 2026, averaging 83.3 mb/d and 83.7 mb/d respectively. However, the profitability of refining is under pressure. While margins in May hit their highest levels since early 2024, the early-June rally in crude prices has already begun to erode cracks, particularly for gasoline, naphtha, and fuel oil. This reinforces the broader trend: even where demand is rising, the system remains saturated.

Oil prices are still higher than previous month - what impact will we see on U.S. shale? This brings us back to the U.S. shale patch, where the on-the-ground data continues to show restraint. According to Primary Vision , the latest Frac Spread Count (FSC) stands at 182, unchanged from the prior week and down 64 spreads year-over-year. Completion activity is not keeping pace with what might be implied by futures prices or margin opportunities. The Frac Job Count (FJC), currently at 214, is also down five week-over-week and remains flat year-over-year. The momentum that typically builds heading into summer has failed to materialize.

The Frac Job Count (FJC) forecast, extending over the next 52 weeks, points to a subdued and range-bound trajectory, with the current national forecast sitting at 205—down 57 jobs year-over-year. The accompanying forecast chart shows no indication of a sustained rebound; rather, it projects continued volatility around the 190–210 range, suggesting a market environment characterized by caution rather than expansion. This outlook reinforces the broader macro picture: with global oil supply growth outpacing demand and inventories steadily rebuilding, there is little commercial incentive for U.S. operators to ramp up completions - even if prices remain high. As such, FJC is expected to remain on a flat to stable path, mirroring operator discipline and a capital allocation strategy focused on balance sheet resilience over production growth.

Yes, consistently higher prices might help FSC in the shorter run and also OFS to regain some their profits but so far the message is straightforward. In the absence of a physical disruption to flows, oil markets are oversupplied. The geopolitical risk is real, but so far contained. Inventories are building, supply is growing faster than demand, and the price ceiling is being defined not by scarcity, but by restraint.