Atlantic basin physical crude differentials have weakened in recent trading amid softer demand from the Asia-Pacific region, alongside Strategic Petroleum Reserve releases, RBC Capital Markets strategists said in a Thursday note.
This has eased supply tightness, enabling prompt delivery. "Despite the ongoing supply disruptions out of the Middle East, Atlantic Basin physical crude differentials have remained softer over the last few weeks as seemingly weaker appetite out of APAC and the release of SPR volumes have provided some relief to prompt tightness," analysts said in a weekly commentary.
RBC analysts said that buyers' crude sourcing patterns have shifted. Lower refinery activity also increased crude availability across the Atlantic Basin, helping calm prompt market tightness despite continuing Middle East supply disruptions.
All these aspects, combined with drawdowns in US commercial inventories, have moderated physical market differentials.
RBC analysts highlighted this point, citing Bonny Light crude, which has recently traded at a premium of $3.20 per barrel.
Another contributing factor was the softening of the Dated-to-Front Line, the spread between Dated Brent and the front-month futures, in recent trading sessions.
RBC still expects oil fundamentals to improve later this summer as refinery runs increase and ongoing outages continue reducing inventories.
"However, we maintain that the physical market will likely strengthen in the coming weeks
barring underestimated refinery-level demand destruction, as supply outages persist and inventories draw going into summer demand season and the likely increases in refinery activity," RBC analysts said.
For natural gas, RBC said seasonal price swings will likely become more extreme, with larger summer and winter peaks gradually pushing yearly averages higher.
The bank expects Henry Hub gas prices to remain between $2.76 per million British thermal units and $3.25/MMbtu during Q2 before climbing above $3.51/MMBtu later this year.
RBC forecasts US gas production will increase by 1.7 billion cubic feet per day in 2026 and by another 1.2 Bcf/d in 2027.
"We have been conservative on supply growth, and with production having pared back slightly from high levels, we still think our conservative (vs peers) supply growth forecast for this year and next is fair," RBC strategists said, noting, "We expect production growth of 1.7 and 1.2 Bcf/d in 2026 and 2027, respectively, in annual average terms".
The bank also said expanding liquefied natural gas exports and rising electricity demand from data centers will eventually require stronger production growth.
RBC said US solar manufacturers filed another tariff circumvention request targeting Chinese-linked solar products imported through Ethiopia.
According to the bank, Ethiopian solar module imports increased sharply in June 2025 after duties started on products shipped from Cambodia, Malaysia, Thailand and Vietnam.
RBC also said regulators imposed initial duties this year on solar imports from India, Laos and Indonesia after investigators found Chinese firms rerouted products through those countries.
The bank said Ethiopia, the Philippines, Nigeria and Kenya represented 77% of US solar module imports in March 2026, rising from 6% during 2025 as suppliers shifted export routes.
According to RBC, markets expect economic pressure to force a reopening soon, but the bank questioned whether negotiations can quickly restore normal shipping activity.
The Strait of Hormuz may not fully reopen in June, while continued shipping disruptions could tighten oil markets during the summer demand season, analysts said.
The bank said disagreements surrounding Iran's uranium reserves and enrichment program continue to reduce the likelihood of a fast diplomatic breakthrough.
RBC expects Iran's Islamic Revolutionary Guard Corps to maintain its influence over the Strait, as the waterway now plays a larger strategic role for Tehran.
Even after a possible agreement, Western shipping firms may avoid paying transit fees to sanctioned Iranian groups, while security risks could discourage shipowners from returning.
Shipping specialists also told RBC that traffic volumes may remain restricted unless vessels regain unrestricted access and Iran loses military control over the route.