The U.S. Energy Information Administration now expects Brent crude to average about US$55 a barrel in 2026 — a level analysts say reflects a return to oversupply that could push prices below US$60 next year. Major forecasters and several investment banks point to weakening demand and rising output from both OPEC+ and non‑OPEC producers as the main drivers.

How the glut is forming

Analysts point to a simple balance-of-supply problem: demand growth has weakened while production has broadly risen. ABN AMRO Bank said weak global demand growth combined with rising supply from OPEC+ and non-OPEC sources has produced an oversupplied market. Moutaz Altaghlibi, senior energy economist at ABN AMRO Bank, described the backdrop as one in which rising output is meeting only modest growth in consumption.

The U.S. Energy Information Administration (EIA) quantified the shift in its Short-Term Energy Outlook, saying it expects global oil inventories to continue rising into 2026 and putting its 2026 Brent average at about $55 a barrel. Several investment banks reached similar conclusions, with some forecasting average oil prices below $60 a barrel in 2026 on the view that persistent oversupply will pressure Brent and WTI. Macquarie Group cautioned that geopolitical or weather risks could still slow a price slide.

Geopolitics and stockpiles make the outlook

Forecasters note that geopolitical events and strategic buying can offset downward pressure. The EIA said two factors changed its view: China's ongoing purchases for strategic stockpiles, and a recent round of sanctions on Russia's oil sector that could cut production below earlier estimates.

"First, we now assess that China’s ongoing purchases of oil for strategic stockpiling will place more upward pressure on oil prices than we had assumed previously," the EIA said.

A Reuters poll of 34 economists and analysts in February showed those risks feeding into forecasts: the poll raised its 2026 Brent average to about $63.85 a barrel and put 2026 WTI at roughly $60.38 a barrel, increases driven largely by a war premium tied to the U.S.-Iran standoff. Diplomatic moves were reported — Oman’s Foreign Minister said indirect U.S.-Iran talks had made "significant progress" and were set to continue.

What producers might do

Faced with excess inventories, producers have two broad options, each with trade-offs:

  • Cut output to defend prices: could lift prices in the short term but reduces near-term revenues and may invite increased non-OPEC production.
  • Maintain or grow production to protect market share: keeps volumes and cash flow up but keeps pressure on prices and strains margins for higher-cost producers.

Some analysts, including Macquarie, say OPEC+ may need to implement production cuts in the second half of 2026 if prices slide sharply. ABN AMRO similarly warned that absent producer action, the supply glut could persist through 2026.

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The key near‑term test is whether OPEC+ moves to implement production cuts in the second half of 2026 — action analysts say would be necessary to arrest a slide toward sub‑US$60 averages.

This article was created with AI assistance.