Where The Oil Market Actually Is

Written by Dax Atkinson, Chief Investment Officer at Rockport Companies

At Rockport, we do not bet on oil prices when we make investment decisions. Every project we underwrite must be viable at the current strip, and we hedge production to help secure returns. That said, we monitor the market closely as it impacts our cost structure and the competitive dynamics in every basin where we operate. Right now, there’s much worth paying attention to.

Prior to the war in Iran, the oil setup was tighter than the headlines suggested. We believe the supply disruption from the war has brought forward the realization that we are not in a glut of oversupply. Demand is running well above consensus, OPEC spare capacity is shrinking, global inventories are drawing at rates not seen in decades, and the capital and time required to rebuild lost supply sit beyond a quick cycle. One thing I have learned about oil is that the price can always go lower than you think and higher than you think. Today, the risks skew to the upside.

The War and the Supply Side

Middle East oil production fell by about 12 million b/d (barrels per day) in March 2026 versus February, the largest month‑over‑month supply shock the oil market has ever absorbed. Saudi production dropped by roughly 3.15 million b/d, Iraq by 3.0 million b/d, and Qatar, Kuwait, and the UAE each fell by more than 1 million b/d. The surprising outlier was Iran, whose crude output held essentially flat despite the scale of strikes on its energy infrastructure. On top of the lost crude supply, the shutdown of Qatar’s LNG is pulling an additional 1.7 million b/d of diesel demand into the market as power generators substitute liquid fuels for gas. Even with more than 400 million barrels of announced OECD strategic reserve releases assumed, the math pencils to a large net inventory draw the longer forfeited Gulf volumes persist.

Demand Is Resilient

Consensus spent most of 2025 telling a story about a large amount of crude ‘on the water’ or ‘in transit’ along with stalling demand. Neither showed up. Global oil demand ran at 107.3 million b/d in February 2026, up 3.4 million b/d from the February 2025 level, and close‑to‑real‑time metrics point to continued strength. For example, airline activity in March was higher year‑over‑year. Higher diesel crack spreads also point to higher demand. Cornerstone Analytics, whose tracking work we find reliable, estimates full‑year 2026 global oil demand at roughly 106 million b/d, approximately 2 million b/d above the 2025 calendar year average near 104 million b/d. That is higher than the 1.0 to 1.2 million b/d of growth that the EIA and J.P. Morgan have published for 2026, and it runs directly counter to the IEA’s April 2026 revision, which now calls for 2026 demand to contract modestly versus 2025.

OPEC Spare Capacity and Declining Inventories

Saudi Arabia is reportedly reconsidering its upstream spending plans, with an eye toward demonstrating the ability to produce roughly 12 million b/d for a sustained period over the next year, as a way to underscore the scale of its spare capacity. This spare capacity remains a central pillar that oil and gas market participants rely on. The past six weeks have underscored how quickly the system can tighten when supply is impaired. OECD inventories fell by roughly 68 million barrels in March 2026, the largest March draw in at least three decades, and early April estimates suggest an additional roughly 100 million barrel draw against a seasonal pattern that typically delivers a build of about 50 million barrels. Global inventories at the end of March now sit below where they began 2025, a reality that should put the super glut narrative to rest.

Rebuilding Takes Capital and Time

This is the part of the cycle most market watchers underestimate. Damage across the Persian Gulf and forced shut‑ins that were not orderly are not fixed in a quarter. Refineries, gas processing plants, and wellhead deliverability take billions of dollars and multiple years to rebuild, with skilled labor and long‑lead equipment as the binding constraints. We hesitate to forecast when this production will be restored, but we would count the timeline in years not months.

The Forward Curve May Be Underpricing 2027 and 2028 Oil

This is where we think the market is most disconnected from the underlying fundamentals. Backwardation has flattened since mid‑March, but the curve as of April 2026 remains unusually steep, with the 2027 WTI strip in the low $70s and the 2028 in the high $60s, versus the balance of 2026 in the low $80s and prompt physical delivery trading over $100. Traders appear to be betting that the war is resolved quickly and that physical supply normalizes within the next year. That view is hard to reconcile with the amount of capital and time required to rebuild Persian Gulf infrastructure, rebuild OPEC spare capacity, and keep up with demand that continues to surprise to the upside. If even one of those three holds true, the outer years of the strip look too low. For consumers of crude, this may be a curve worth locking in.

Rockport and the Rockport Energy Fund

Rockport sources, underwrites, drills, operates and manages capital across U.S. oil and gas projects. We currently operate four projects in the Permian in West Texas and the Bakken Shale in North Dakota producing 10,000 barrels/day. The Rockport Energy Fund targets a diversified portfolio of drill‑ready, short‑duration, lower‑risk projects with net returns greater than 20%.

The oil price will move where it moves. Our job is to own the right barrels, at the right cost, with the operational and investment discipline to capture the outcome.

Sources

Cornerstone Analytics, Morning Energy Updates, April 2, April 20, and April 21, 2026.

International Energy Agency, Oil Market Report, April 2026.

U.S. Energy Information Administration, Short‑Term Energy Outlook, April 2026.

J.P. Morgan Global Research, 2026 oil price and demand outlook.

Bloomberg, “Why Oil Futures Are Trading Far Below Real‑World Prices,” April 2026.