Oil Prices Forecast: Why WTI Near $60 and Brent Around $65 Look Capped

Oil (WTI / CL=F, Brent / BZ=F) 2026: Supply Surplus, Political Noise, Capped Upside

Global Oil Demand 2026: 104.98 mb/d With 930 kb/d Growth

Global Oil demand in 2026 is projected around 104.98 mb/d, adding roughly 930 kb/d versus 2025 as growth normalizes after last year’s tariff shock and price slump. All net growth comes from non-OECD economies. Emerging Asia, especially petrochemicals, drives most of the incremental barrels as feedstock demand recovers. Gasoline growth in developed markets continues to slow due to efficiency and EV penetration, so the marginal barrel is industrial and petrochemical, not a US commuter. Lower prices are part of the story: North Sea dated crude averaged $62.64/bbl in December, down $0.99/bbl month-on-month and roughly $16/bbl below the level a year earlier, the weakest since early 2021. Demand is growing modestly, but the magnitude is too small to offset the supply and inventory overhang.

Global Supply 2026: 108.7 mb/d and an Embedded 3–4 mb/d Surplus

Global supply in December was roughly 107.4 mb/d, about 1.6 mb/d below the September record after temporary declines in Kazakhstan and several Middle Eastern OPEC+ producers, partly offset by a 550 kb/d rebound in Russian output to a 33-month high. For full-year 2026, world supply is projected to rise another 2.5 mb/d to about 108.7 mb/d, following a 3 mb/d increase in 2025. Non-OPEC+ contributes around 1.8 mb/d of the 2025 increase and 1.3 mb/d in 2026, led by the “Americas five”: the United States, Canada, Brazil, Guyana, and Argentina. This means you are adding several million barrels per day of new supply into a market where demand is below 105 mb/d, leaving a structural surplus on the order of 3–4 mb/d once you combine production and inventory builds. That surplus defines the ceiling for CL=F and BZ=F.

OPEC+ Spare Capacity: 4.56 mb/d of Effective Shock Absorber

Within OPEC+, the numbers confirm how much buffer sits idle. The OPEC-9 core produced about 23.12 mb/d in December with an implied target near 23.23 mb/d, while sustainable capacity is around 27.1 mb/d, leaving roughly 4.01 mb/d of spare capacity in that subgroup alone. Saudi Arabia pumped around 9.70 mb/d versus an implied target of 10.1 mb/d, but sustainable capacity is close to 12.11 mb/d, so Riyadh holds approximately 2.41 mb/d of effective spare barrels. The UAE produced 3.64 mb/d against capacity near 4.28 mb/d, another 0.64 mb/d of spare. Across the broader OPEC+ alliance, total sustainable capacity is about 48.01 mb/d versus December production of 43.29 mb/d, implying 4.56 mb/d of effective spare capacity (excluding shut-in sanctioned volumes). Iran (~3.41 mb/d), Libya (~1.30 mb/d) and Venezuela (~0.99 mb/d) remain outside the quota system and add further latent flexibility. This scale of spare capacity caps upside on BZ=F and CL=F because any sustained spike is an invitation for OPEC+ to release barrels.

Inventories: 470 mb Built in 2025, With a 75.3 mb Jump in November Alone

The stock picture explains the persistent weakness in Oil despite recurring geopolitical headlines. Observed global inventories increased by about 470 mb in 2025, equivalent to an average build of ~1.3 mb/d. In November alone, stocks rose 75.3 mb (~2.5 mb/d), with 96% of that move in crude and most of it onshore rather than afloat. OECD industry stocks climbed 7.3 mb to 2,838 mb, roughly in line with the five-year average, while Chinese crude stocks expanded as new import quotas were used to lock in cheap barrels. Preliminary data for December indicate additional builds, particularly in products, even as some Middle Eastern producers drew down domestic crude at year-end. When you combine total stocks that are hundreds of millions of barrels higher than at the start of 2025 with forward supply growth, the inventory buffer becomes a powerful brake on any sustained rally in CL=F or BZ=F.

Spot Market: CL=F Around $60, BZ=F Mid-$60s After Kazakhstan Spikes Fade

Current pricing reflects that oversupplied reality. WTI / CL=F trades around $60.57/bbl (about +0.35% on the day), while Brent / BZ=F sits near $65.10/bbl (about +0.28%). In recent sessions, Brent has printed levels like $64.13/bbl with WTI at $59.72/bbl, or $63.65/bbl versus $59.69/bbl, and $65.03/bbl versus $60.50/bbl after each wave of Kazakhstan headlines. North Sea Dated averaged $62.64/bbl in December, down a modest $0.99/bbl from November but registering a sixth consecutive monthly decline and an intramonth low of $60.07/bbl, the weakest since early 2021. Meanwhile, US benchmark natural gas is around $4.695/MMBtu, up more than 20% in a session, showing that weather can tighten gas, but crude remains a macro asset anchored by surplus barrels. The takeaway is straightforward: oil is trading as a range-bound risk asset, not a scarcity asset.

Kazakhstan and CPC: Tengiz Force Majeure Is Transitory, Not Structural

The immediate supply story is Kazakhstan. Output at the Tengiz and Korolev fields was halted after fires damaged power infrastructure, causing power distribution failures and forcing the operator TCO to declare force majeure on deliveries into the CPC pipeline. Industry sources indicate production at these two fields could remain shut for 7–10 days. In parallel, crude from the Kashagan field has been diverted to the domestic market for the first time due to equipment damage and bottlenecks at the Black Sea CPC terminal. Structurally, Tengiz is one of the largest oilfields globally, and in a tight market this would support a meaningful risk premium for BZ=F. In the current regime of 3–4 mb/d surplus supply, 470 mb of 2025 stock builds and more than 4.5 mb/d of OPEC+ spare capacity, this is noise rather than regime change. Traders initially marked CL=F and BZ=F higher, but the move faded as the market correctly treated the outage as temporary against an otherwise bloated balance.

Trump Tariffs, Greenland and Davos: Risk Premium Versus Demand Destruction

The largest medium-term swing factor for Oil is political. US President Trump has tied tariff policy directly to his Greenland strategy and broader disputes with Europe. Eight European countries – Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland – face a 10% tariff on exports to the US from February 1, rising to 25% on June 1 if no agreement is reached. In addition, Trump has threatened 200% tariffs on French wine and champagne, while also maintaining a hard line on control of Greenland. At the same time, geopolitical risk around Iran and Venezuela remains elevated. Iranian exports fell roughly 350 kb/d from October’s high to about 1.6 mb/d, with barrels increasingly stored at sea. Venezuelan exports dropped from around 880 kb/d in December to roughly 300 kb/d in early January after the US blocked sanctioned tankers. Drone attacks and regional security issues have also disrupted some crude movements in the Black Sea and Caspian areas, affecting Kazakh flows. Yet despite this, Brent / BZ=F trades only in the mid-$60s, and North Sea Dated is $16/bbl below last year. The explanation is simple: markets see tariff-driven demand risk as more powerful than sanction-driven supply risk. Higher trade friction raises recession probability and lowers demand growth for Oil, while supply is flexible due to spare capacity and non-OPEC growth.

Davos, Dollar Weakness and Cross-Asset Flows: Limited Support for Crude

At the World Economic Forum in Davos, Trump’s comments about Greenland, tariffs, and the upcoming Fed chair nomination add another layer of uncertainty to global risk sentiment. Risk-off flows are visible: gold trades at record levels, US Treasuries see selling pressure followed by safe-haven interest, and the dollar index has dropped from roughly 99.4 to the 98.5 area in just two sessions. A weaker dollar usually supports commodities like Oil because CL=F and BZ=F become cheaper in non-USD terms, but that mechanical tailwind is being offset by expectations of weaker trade and slower global growth. The net effect is that crude gets some FX support but still cannot sustain a breakout as long as physical balances remain loose.

US Inventories, CL=F Fundamentals and Rig Count: Builds Re-Appear

On the US side, the short-term signals for WTI / CL=F lean bearish. Market expectations suggest crude inventories rose by about 1.7 mb last week, with gasoline stocks also building while distillate inventories likely declined. The American Petroleum Institute and EIA weekly data will refine the exact figures, but the direction is clear: incremental barrels are heading into storage, not being absorbed by demand. US crude production hovers around 13.75 mb/d as of early January. The US oil rig count is down about 68 rigs versus a year earlier, but higher productivity per rig and a backlog of drilled-but-uncompleted wells allow total output to remain near record levels. Refinery runs jumped by 2 mb/d to 85.7 mb/d in December ahead of maintenance season in the US, Europe, the Middle East and Asia. For 2026, global crude runs are forecast to average 84.6 mb/d, adding 770 kb/d year-on-year, slightly below the 930 kb/d increase seen in 2025. Refining margins, particularly in Europe, have weakened sharply, with middle-distillate cracks roughly halving from November highs, signalling pressure on refinery economics and a reluctance to pull more crude through the system at current prices.

Russia: $39.2/bbl Export Price, Budget Stress and Confirmation of a Lower Price Regime

Russia’s macro situation gives a clear signal about the new price regime for Oil. The country’s average export price for crude in December was around $39.2/bbl, far below both global benchmarks and Russia’s budget assumptions. That discount reflects sanctions, wider quality and location differentials, and limited access to premium markets. The 2026 federal budget plans 40.3 trillion rubles (roughly $520 billion) in revenues, including 8.9 trillion rubles (~$115 billion) from oil and gas, against planned spending of 44 trillion rubles (~$568 billion). Analysts estimate that at current prices and exchange rates, energy revenues could undershoot by at least 3 trillion rubles (~$39 billion), implying a deficit closer to 5.0–5.5 trillion rubles (about 2–2.5% of GDP) versus the official 3.8 trillion projection. Under Russia’s fiscal rule, revenue shortfalls are covered by selling FX and gold from the National Wealth Fund (NWF). Liquid NWF assets stood just above 4 trillion rubles (~$52 billion) at the start of the year, and about 0.7 trillion rubles of additional FX sales are already planned in 2026. Some analysts warn that liquid assets could be exhausted as early as this year if export prices stay near the $40/bbl area. This pressure incentivizes Russia to cooperate with OPEC+ and avoid policies that would push CL=F and BZ=F significantly lower, but it also proves that the global crude market has already shifted to a lower equilibrium price band than many producer budgets assume.

TotalEnergies and the Majors: Integrated Models Keep Upstream Supply Online

Earnings dynamics at integrated majors show why supply has not collapsed despite lower Oil prices. TotalEnergies expects its Q4 2025 financial results to be broadly in line with Q4 2024, even though global crude prices fell about $11/bbl over the period. Upstream oil and gas production increased roughly 5% year-on-year, which limited the drop in upstream earnings to around $6 per barrel, compared to the $11 decline in headline crude prices. European refining margins surged to around $85.7/ton, more than triple Q4 2024 levels, as sanctions and restrictions on Russian refined products tightened the product market. Downstream marketing and services earnings are expected to rise by roughly 5%, while the integrated power business generated around $2.5 billion in annual cash flow, helped by minority stake divestments in renewables. This integrated resilience means that large players can live with BZ=F in the mid-$60s and CL=F near $60/bbl without drastic upstream capex cuts. As a result, non-OPEC supply continues to grow, reinforcing the global surplus and limiting bullish price repricing.

Market Structure for CL=F and BZ=F: Range-Bound With Bearish Asymmetry

Putting the pieces together, the forward structure for Oil is fully consistent with an oversupplied system. Demand grows 930 kb/d to 104.98 mb/d; supply climbs 2.5 mb/d to 108.7 mb/d; inventories added 470 mb in 2025, including a 75.3 mb build in November; OPEC+ holds 4.56 mb/d of effective spare capacity; Kazakhstan disruptions are measured in days; Russia continues to export despite attacks, and Trump’s tariff strategy raises demand risk faster than sanctions can constrain supply. Short-term geopolitical events (Tengiz outages, Venezuelan enforcement, Iranian sanctions episodes, tariff headlines) can push CL=F and BZ=F around intraday, but the structural backdrop is a heavy market. At current prices – WTI / CL=F near $60/bbl and Brent / BZ=F around $65/bbl – crude already trades at a discount to last year with substantial buffers in stocks and capacity. The downside is cushioned by producer budget constraints and the likelihood of OPEC+ intervention if CL=F breaks well below the mid-$50s and BZ=F into the high-$50s, but the upside is capped by surplus barrels and demand uncertainty. On a pure risk-reward basis, that gives Oil a bearish, sell-rallies bias: spikes into the high-$60s or low-$70s on BZ=F driven by transient news are more attractive to fade than to chase, while deep dips are likely to be managed by policy rather than spiralling into a structural bull market.

That's TradingNEWS