CBA says global oil supply buffers are keeping prices below $US100

Pipeline alternatives, weaker Chinese imports and rising non-OPEC+ production are helping offset the impact of the ongoing Strait of Hormuz closure

Oil prices have remained below $US100 a barrel despite the continued closure of the Strait of Hormuz, with Commonwealth Bank commodities analyst John Oh pointing to several supply buffers that are helping keep the global market balanced. Before the war, the oil market was already facing an oversupply, with Brent crude prices moving towards $US60 a barrel. According to CBA, this underlying surplus means oil flows through the Strait do not need to return fully to pre-war levels before supply concerns begin to re-emerge.

Pipeline bypasses around the Strait are providing an estimated 5 million barrels a day (mb/d) of additional supply flexibility, while structurally lower Chinese imports are reducing demand by around 2.5–3.0mb/d. Rising non-OPEC+ production outside the Middle East is adding another 1.1mb/d. Together, these factors have reduced the amount of oil that needs to pass through the Strait to keep global supplies broadly balanced.

Oil flows through Hormuz remain critical to the price outlook

CBA estimates that oil flows through the Strait of Hormuz need to reach only around 50–60% of pre-war levels for oversupply concerns to return. The bank estimates the breakeven level at between 6.8mb/d and 8.7mb/d, equivalent to around 34–43% of pre-war flows, with a central estimate of 7.8mb/d.

However, determining the actual volume of oil moving through the Strait remains difficult. Satellite data has become less available, while some tankers are switching off their transponders and effectively going "dark" while attempting to transit the area. This has created uncertainty around the true level of crude flows.

CBA believes some estimates may be too high or too low. A flow rate of around 9mb/d would suggest oil prices should remain below $US80 a barrel because of renewed oversupply concerns. By contrast, if flows are closer to 4mb/d, inventory depletion risks would justify prices closer to $US100 a barrel.

CBA sees oil prices easing over the longer term

CBA expects Brent oil futures to trade within a relatively wide $US70–100 a barrel range during the second half of 2026. The lower end of that range would be consistent with the Strait reopening peacefully, while the upper end would reflect a continued closure accompanied by escalating US-Iran attacks.

The bank expects prices to moderate further as additional supply enters the market. Its forecast range falls to $US60–80 a barrel in the first half of 2027, before declining to $US50–70 a barrel in the second half of 2027 as new non-OPEC+ production and pipeline capacity bypassing the Strait come online.

What it means for investors

For investors, the outlook suggests that the Strait of Hormuz remains a major source of uncertainty for energy markets, but its closure alone may not be enough to sustain oil prices above $US100 a barrel. The amount of crude successfully moving through the Strait, global inventories and alternative supply routes will remain key factors in determining where prices trade.

Energy producers could continue to benefit from elevated prices if disruptions intensify, while sustained increases in alternative supply could place pressure on oil prices over the longer term. CBA's forecasts point towards a gradual easing in prices as new production and infrastructure reduce the market's dependence on the Strait.

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