Brent above $100 on supply shocks; de-escalation may cool prices: Analyst

Crude Oil: Supply Shocks, Geopolitics, and the Road Ahead

Global crude oil markets entered a period of extreme volatility in March as a confluence of geopolitical shocks triggered one of the sharpest price rallies in recent years. West Texas Intermediate (WTI) surged by more than 50 per cent, while Brent crude climbed nearly 60 per cent from pre-conflict levels, lifting prices above $100 per barrel. The inflationary spillover has been immediate: average US gasoline prices crossed $4 per gallon for the first time since 2022, reinforcing concerns that energy may once again become a dominant macroeconomic headwind. 

This price shock has been driven by simultaneous disruptions across multiple supply vectors. Beyond the Middle East escalation, Ukraine intensified its campaign against Russian energy infrastructure, targeting both upstream and refining assets in an effort to constrain Moscow’s oil revenues. The scale and coordination of these attacks in March 2026 marked a significant escalation in the energy dimension of the Russia–Ukraine conflict.

 

Russia: Refining Damage, Resilient Exports, and Revenue Pressure

Ukraine’s drone campaign inflicted substantial damage on key Russian refining hubs, including the Kirishi refinery (350 kb/d capacity), Saratov, Volgograd, Ilsky, and several Bashneft facilities. In aggregate, refining disruptions temporarily impaired an estimated 10–15 per cent of Russia’s total refining capacity, forcing shutdowns of primary distillation units and triggering recurring fires and outages. Export infrastructure has not been spared: terminals at Primorsk and Ust-Luga were struck, halting up to 40 per cent of Russia’s crude export capacity when combined with pipeline constraints and tanker seizures. 

Despite these headwinds, Russia has maintained seaborne crude exports at approximately 3.6 mb/d in the four weeks to March 22, underscoring its ability to reroute flows and lean on a shadow shipping network. However, resilience in volumes has not translated into revenue stability. Bloomberg estimates suggest Russia lost roughly $1 billion in crude export revenues in a single week, as the shipments from Primorsk and Ust-Luga declined by around 33. 

Asia remains the primary destination absorbing Russian barrels. India’s imports of Russian crude have rebounded to roughly 1.75 mb/d, while China has further increased its share, reinforcing a structural reallocation of Russian energy flows away from Europe and toward price-sensitive Asian buyers. This realignment has softened the immediate supply shock but has failed to offset the broader tightening driven by infrastructure damage and logistics constraints.

GCC Output Curtailments and the Hormuz Constraint

Compounding Russian disruptions, Gulf Cooperation Council (GCC) producers have enacted deep production cuts since early March as the Strait of Hormuz—the conduit for an estimated 65–80 per cent of GCC crude exports—faced rising risks of effective closure. Saudi Arabia reduced output by approximately 2–2.5 mb/d from a baseline near 12 mb/d, with production averaging around 10.3 mb/d in February–March. The UAE curtailed between 0.5 and 1.5 mb/d, Kuwait between 0.5 and 1.3 mb/d, and Iraq, closely aligned with GCC production dynamics, trimmed output by nearly 2.9 mb/d. 

These reductions reflect not policy-driven restraint but physical and logistical realities. Storage constraints, tanker availability, and the limited capacity of bypass routes—such as Saudi Arabia’s East–West pipeline and the UAE’s Fujairah export corridor—have forced upstream shutdowns to avoid tank-top scenarios. On a sustained basis, total GCC curtailments related to the regional conflict are likely running between 4 and 6 mb/d, representing one of the largest concentrated supply shocks in modern oil market history.

Demand Outlook: Downward Revisions, with China as a Partial Offset

On the demand side, the International Energy Agency has sharply revised its 2026 global oil demand growth forecast down to 640 kb/d year-on-year, a cut of 210 kb/d from prior estimates. The agency attributes the downgrade to higher prices, macroeconomic uncertainty, and direct consumption losses linked to Middle East disruptions, which it estimates curtailed demand by nearly 1 mb/d during March and April alone. Growth remains well below historical norms, with petrochemicals providing the primary offset to structurally subdued transport fuel demand. 

China offers a tentative counterbalance. The official NBS Manufacturing PMI rebounded to 50.4 in March from 49.0 in February, marking a return to expansion and the strongest reading in a year. Output, new orders, and export orders all improved, supported by fiscal spending and AI-related global demand. While higher energy costs pushed input and output prices sharply higher, the expansion signals resilient industrial momentum that could underpin incremental oil demand in the second half of 2026. The private Caixin PMI, which remained expansionary at 50.8, reinforces this cautiously constructive signal.

Price Outlook: Normalisation Scenarios versus Prolonged Disruption

 

Current Brent prices above $100/bbl reflect an extraordinary supply shock layered across multiple geographies. Prior to the escalation, consensus forecasts clustered in the $60–80/bbl range, underpinned by ample OPEC+ spare capacity and a structurally surplus market. In a de-escalation scenario—combining normalisation of approximately 2 mb/d of Russian exports, partial recovery in refining capacity, and stabilisation of major maritime chokepoints—effective supply of 3–5 mb/d could re-enter the market. Against the backdrop of modest demand growth, this would materially loosen balances and drive a meaningful price correction. 

The risk–reward profile has shifted decisively to the downside as de-escalation signals intensify, raising the prospect of a rapid $20–30/bbl correction as the geopolitical risk premium unwinds. With key catalysts approaching—notably the April 6 deadline and the outcome of the Islamabad talks—we recommend remaining sidelined on directional exposure until visibility improves. A sustained break below $95, accompanied by confirmed ceasefire progress, would represent a clear signal to re-engage on the short side. 

Disclaimer: This article is by Mohammed Imran, research analyst. Mirae Asset Sharekhan. Views expressed are his own.