Brent crude is heading into the new year under sustained pressure, with prices at risk of slipping below $60 per barrel after posting their steepest annual decline since 2020
The weak performance is expected to extend into 2026, as supply growth continues to outpace demand. This is set to heighten fiscal pressure on oil-dependent Gulf producers and sharpen scrutiny of Opec+’s strategy of restoring output to regain market share, even as global consumption continues to expand.
Analysts say the oil market is entering a period of structural imbalance, with production expected to grow at roughly three times the pace of demand despite steady consumption gains.
“The oil market is heading into 2026 with an interesting contradiction, as demand continues to grow at a healthy pace while supply expands nearly three times faster,” said Ahmad Assiri, research strategist at Australia-based broker Pepperstone. “This imbalance points towards a widening surplus that could reform the price landscape and test the policy of major producers.”
Global oil demand is forecast to rise by about 900,000 bpd in 2025 to 105.5 million bpd, followed by a similar increase in 2026 and stronger growth in 2027. Supply, however, is projected to expand at three times that rate in 2025 and 2026, driven by higher output from Opec+ and non-Opec producers.
“With this backdrop, the pull on prices is unmistakable. Brent is likely to slip below $60/b in 2026, fall into the low $50s by fourth quarter and potentially end the year at a lower range,” Mr Assiri said.
Brent was trading 0.52 per cent higher at $62.26 a barrel at 4.17pm UAE time on Tuesday, while West Texas Intermediate, the gauge that tracks US crude, was up 0.57 per cent to $58.41 per barrel.
Concerns over a looming oil glut have intensified as producers step up output. Opec+, led by Saudi Arabia and Russia, began restoring supply in April as it sought to regain market share lost during years of cuts, but are pausing further increases for the first quarter of next year amid weaker seasonal demand.
The International Energy Agency expects supply to exceed demand by 3.85 million bpd in 2026, equivalent to nearly 4 per cent of global consumption.
Investment banks have also become more cautious. “We forecast Brent/WTI to decline further to 2026 averages of $56/52, as the last big supply wave leaves the market in a 2 million bpd oversupply,” Goldman Sachs analysts said this month.
In its base case, the US bank expects prices to bottom out in mid-2026, supported by “solid demand growth of 1.2 million bpd” and the possibility of further reductions in Russian supply if western sanctions persist amid the war in Ukraine and lower prices slow non-Opec output growth.
Russia factor
Russia remains the key swing factor, the bank said, warning of downside risks if a peace deal leads to a gradual recovery in Russian production or if the global economy slows. In such a scenario, Brent could average $51/b in 2026.
Prices, however, “could overshoot our forecast if an intensification in attacks on Russian oil infrastructure or sanctions reduces Russia supply more quickly than in our base case”, the bank said.
Geopolitics has continued to inject volatility into oil markets, though without sustained supply disruption. Oil held modest gains as traders weighed tensions in Venezuela, Russia and Yemen against growing signs of a global supply glut and rising inventories. Prices jumped as much as 5 per cent in late October after the US announced tougher sanctions on Russia’s two largest oil companies, Lukoil and Rosneft. A brief Iran-Israel conflict in June pushed prices higher on fears of disruption through the Strait of Hormuz, a critical chokepoint for global oil flows.
“There is no geopolitical risk premium in oil prices, just out of the fact that there were no large supply disruptions this year,” said Giovanni Staunovo, a strategist at UBS. “If there is a peace deal between Ukraine and Russia, oil prices would fall on the announcement day, but I would expect prices to recover later, as Russian production is unlikely to rise and the country is still bound to the Opec+ agreement.”
Mr Staunovo expects Brent to trade mostly between $60 and $70 a barrel next year, with brief moves outside that range. Prices are likely to start 2026 near $62 a barrel and end the year closer to $67, he said.
“Oil demand growth should be a bit stronger next year, benefiting from monetary and fiscal stimulus measures and a weaker US dollar,” he added.
