On the last day of 2025, the energy world is caught between ambition and reality. We are 25 years from net zero, yet still deeply reliant on oil. Even so, and despite lingering geopolitical tensions across key producing regions, oil prices have stayed comfortably below the $100-a-barrel mark. As we enter the new year, most analysts expect oil to remain well below even the $60/b mark. Even if prices rally, most expect no dramatic spikes, with Brent, the world’s main crude benchmark, likely to remain in a sweet spot in the $60s.
This may not be the best news for Middle Eastern crude producers whose economies and spending plans hinge on higher oil revenue. However, for billions of people around the world, lower oil prices mean cheaper travel, cheaper goods and a more affordable cost of living.
As the year ends, I take a look at the trends likely to shape oil prices and demand over the next 12 months.
Oil prices, or specifically benchmark Brent, are set for a muted start to the year, after posting their steepest annual decline since 2020, after the height of the Covid-19 lockdowns.
As my colleague Fareed Rahman writes, the oil market is moving into a phase of structural imbalance, with supply growth expected to run at around three times the pace of demand despite steady gains in consumption.
What does the demand outlook look like in 2026?
Global oil demand is expected to rise by about 900,000 barrels per day in 2025, taking total consumption to roughly 105.5 million bpd. A similar increase is forecast for 2026, with growth picking up further in 2027.
Where is the imbalance?
Supply is set to grow much faster than demand in 2025 and 2026, at roughly three times the pace. That expansion is being driven by higher output from both Opec+ and non-Opec producers.
What’s the impact on price?
Brent crude is likely to slip below $60/b in 2026, fall into the low $50s by Q4 and potentially end the year at even lower levels, according to Ahmad Assiri, a research strategist at Australia-based broker Pepperstone. UBS expects Brent to trade between $60 and $70 a barrel next year, with only brief excursions outside that range.
2025 has been a year of sanctions and captured oil tankers, whether they’re Russian, Iranian or Venezuelan. With so much embargoed oil in the sea, it is unsurprising that oil prices remain depressed. But with oil tankers floating with no specific destination in sight, does it imply a collapse in demand?
Kpler’s Amena Bakr writes that the build-up of crude at sea does not mean lower demand. She points to the persistent decline in product stocks, which shows people are still consuming even if unrefined crude still remains lost at sea.
Why is there oil on water?
Since early September, an additional 215 million barrels of crude have accumulated at sea, increasing oil-on-water volumes by about 19 per cent, according to analysts at Kpler. Total oil floating on the water is now around 1.3 billion barrels.
Is this a 2020 repeat?
Not quite. While the surplus is becoming more visible, it remains manageable. Unlike 2020, when storage ballooned as demand collapsed, today’s build-up is happening alongside healthy product demand and strong refining margins.
Could this surplus find buyers?
Yes. Pricing dynamics, including discounts on crude, particularly Russian Urals, are likely to encourage additional buying, particularly from major importers such as India and China.
Jargon buster
Inventory: While it could mean a number of things outside the energy world, traders use this word to describe stockpiles of crude oil and refined products such as gasoline and diesel.
Big number
$100 per barrel
Once the oil market’s north star, $100 crude last flashed on screens in 2022 after Russia’s invasion of Ukraine. As the industry looks ahead to 2026, that price point is increasingly a relic of the oil age.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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