Are oversupply fears receding in 2026?
Oil prices rose slightly at the start of the week, reflecting the uncertainty in the global market.
The limited rise comes amid a sharp contrast between bullish and bearish influences, as traders are at a crossroads between fears of a global oversupply in 2026 and diplomatic efforts to end the war in Ukraine that could change the supply map.
The key question now is: Is this slight rally just a blip before the downtrend returns, or is it the start of a real recovery thanks to the proactive decisions of the OPEC+ alliance?
A slight rally in a sea of worries
Oil futures were higher at the start of the week, with Brent crude climbing above $63 a barrel and WTI crude approaching $59.5.
However, the gains remained fragile and range-bound, with both benchmarks still near their lowest levels since late October.
This weakness is due to two main factors:
- Oversupply concerns: Traders remain concerned about the global oversupply expected next year, as OPEC+ and rival producers ramp up production despite weak demand growth.
- Ukraine peace negotiations: Talks to end the war between Russia and Ukraine are raising concerns that sanctions on Russian oil could be lifted, potentially releasing additional volumes into an already oversupplied market.
OPEC+ announces halt to production increases
In a proactive move to counter the expected surplus scenario, the OPEC+ alliance made a strategic decision to suspend all planned production increases through the first quarter of 2026.
The alliance had previously started returning significant amounts of oil to the market in 2025 at a faster pace than expected.
The decision comes after countries in the alliance, led by Saudi Arabia, expressed concerns about the price of Brent crude falling below $60 per barrel.
The decision is clearly aimed at preventing the buildup of inventories and sending a reassuring message to the market that the coalition will not let global prices collapse.
2026 Outlook: A bearish outlook with upside risks
Most official forecasts point to a market surplus and a decline in global prices over the next year.
Global oil demand is expected to grow at a modest 800,000-1.4 million barrels per day in 2026, while global supply could reach 107.4 million barrels per day.
Some analysis suggests that the oversupply could exceed 2 mb/d at its peak during the first half of 2026.
Future scenarios: Between recovery and collapse
The trajectory of oil prices over the next year faces several possibilities, determined by a range of factors:
- Baseline scenario (most likely): Continued downward pressure with Brent averaging between $55 and $60, supported by excess supply, limited demand growth, and the effectiveness of the OPEC+ decision in preventing a sharp collapse.
– Bullish scenario: Major geopolitical disruptions (such as a sudden escalation in the Middle East) or the failure of sanctions to effectively constrain Russian supplies could push prices back towards the mid-$70s.
Geopolitical risks: The most difficult factor to estimate
Although geopolitical tensions (such as attacks on energy infrastructure in Russia or tension with Venezuela) provide temporary support for prices, the market has become saturated with these events, especially with OPEC+ having significant excess production capacity that previously served as a safety net.
As this excess capacity shrinks due to increased production, the market may become more volatile and sensitive to any sudden supply shocks in the future.
In the end, oil markets are currently at a crossroads, and the decisive factor remains OPEC+'s ability to carefully manage supply amid weak global demand growth, and the resilience of US shale production, which may decline if global prices stabilize below the profitability threshold of around $65 per barrel.
