Oil Price Forecast: WTI at $57, Brent at $61 as Market Ignores Looming $70 Squeeze

Crude Oil Market Under Pressure as WTI Falls to $57 and Brent Near $61 Despite Bullish Signals

OPEC+ Stability Meets Market Selloff

Oil futures extended their December decline, with WTI (CL=F) dropping 2.12% to $57.22 and Brent (BZ=F) sliding 2.04% to $60.94, marking one of the sharpest disconnections between fundamentals and sentiment this quarter. Despite a string of supportive developments—OPEC’s firm 2026 demand outlook, inventory draws in the U.S., and a softer IEA glut forecast—traders aggressively sold crude, driven by thin liquidity and fund deleveraging.

The OPEC Monthly Oil Market Report reaffirmed consumption resilience across China, India, and the Middle East, with global demand seen expanding by 830,000 barrels per day (bpd) in 2025 and another 860,000 bpd in 2026. The cartel underscored that supply growth outside OPEC will slow sharply beyond next year, particularly in the U.S. shale sector. Yet futures pricing ignored these revisions, leaving Brent locked in a flat curve near $61 per barrel.

IEA Trims Surplus Forecast as Inventories Reach Four-Year Highs

The International Energy Agency (IEA) reduced its expected global surplus for 2026 from 4.09 million bpd to 3.84 million bpd, signaling early signs of rebalancing. Global inventories climbed to 8.03 billion barrels in October, the highest since 2021, with stock builds averaging 1.2 million bpd this year. However, IEA analysts noted that over 40% of these builds are “oil on water,” reflecting tankers delayed by sanctions on Russia, Venezuela, and Iran, rather than genuine oversupply at consumption hubs.

North Sea Dated Crude averaged $63.63 per barrel in November, its fifth consecutive monthly decline, while Urals crude collapsed $8.20 to $43.52 per barrel as new sanctions throttled Russian export flows. Global supply fell 610,000 bpd in November to 109 million bpd, with OPEC+ accounting for three-quarters of the drop. The IEA expects total production to average 106.2 million bpd in 2025 and 108.6 million bpd in 2026, signaling tighter balances ahead.

U.S. Inventories Fall But Traders Fade The Rally

American data failed to spark a rebound. The EIA confirmed a 1.8-million-barrel draw, after the API reported 4.8 million, indicating stronger winter demand. Yet algorithmic trading and macro risk aversion outweighed fundamentals. The market’s structure remains flat, suggesting traders expect price stagnation rather than a breakout.

Gasoline futures slid 1.84% to $1.749, while natural gas (NG=F) plunged 7.4% to $4.25, deepening pressure on the broader energy complex. Louisiana Light Crude lost 3.44% to $59.75, and the OPEC basket dropped 3.12% to $61.87, both reflecting synchronized weakness across benchmarks.

Fed Rate Cut Fails to Lift Commodities

The Federal Reserve’s 25-basis-point rate cut—bringing the benchmark range to 3.50–3.75%—failed to move oil. Rystad Energy noted that monetary policy is no longer the main price driver, with structural supply dynamics dominating. Chief Economist Claudio Galimberti said the Fed’s cautious easing “adds only a mild tailwind,” emphasizing that commodities will react more to physical balances and geopolitics than rate adjustments.

The U.S. dollar’s minor softening offered short-lived support, but traders remain fixated on ample supply. Rystad estimates that non-OPEC+ output, led by the U.S. and Brazil, could rise 3 million bpd in 2025, offsetting OPEC’s tightening efforts. Yet this trajectory is unsustainable if WTI stays below $60, as shale profitability erodes.

Russia, Iran, and Venezuela Weigh on Supply Structure

Sanctions continue reshaping trade flows. Russia’s exports fell 420,000 bpd in November to 6.9 million bpd, cutting monthly revenues to $11 billion, the weakest since early 2022. Iranian exports held near 1.9 million bpd, though surging “oil on water” volumes signal congestion and limited buyers. Venezuelan production slipped from 1.01 million to 860,000 bpd, hampered by shipping constraints and U.S. compliance uncertainty.

These disruptions underpin OPEC’s argument that underinvestment risks a medium-term deficit. Saudi Arabia’s output stabilized at 9.93 million bpd, UAE pumped 3.59 million bpd, and Iraq averaged 4.5 million bpd, keeping total OPEC-9 production at 23.4 million bpd—below their implied sustainable capacity of 27.1 million.

Asia’s Demand Engine Holds Steady

Asia remains the key buffer against a deeper downturn. India’s Russian oil imports climbed to a six-month high, while China expanded purchases from Saudi Arabia after price cuts averaging $2.10 per barrel. The IEA raised Asian demand forecasts by 90,000 bpd for 2026, crediting stronger petrochemical consumption and power generation needs.

Meanwhile, India’s fuel demand surged 7.2 GW equivalent in November, signaling industrial expansion, while China’s crude inventories grew 58 million barrels year-to-date, suggesting aggressive stockpiling at current discount levels.

Geopolitical Flashpoints Add Asymmetric Risk

Ukraine’s drone strike on Russian Caspian oil infrastructure and tensions in the Black Sea pipeline corridor heightened geopolitical risk premiums, yet crude prices ignored them. Kazakhstan rerouted its Kashagan crude exports after a Black Sea attack, and Iran continues courting non-Western energy partners, including China and Pakistan, to circumvent sanctions.

Shipping volatility has spiked sharply: oil tanker rates are up 467% since October, amplifying delivery costs and complicating arbitrage trades between Atlantic and Asian markets. Analysts warn that if Red Sea or Black Sea disruptions escalate, the physical premium could return swiftly to Brent, reversing current weakness.

Technical Landscape: WTI and Brent Testing Major Floors

WTI (CL=F) trades near critical support at $55–57, while Brent (BZ=F) hovers just above $60. The 50-day EMA sits at $60 for WTI and $63.84 for Brent, acting as a resistance cap for any short-term rally. FXEmpire’s analysis highlights that if either benchmark breaches these psychological levels, the other will likely follow in a synchronized breakdown.

Momentum remains bearish with RSI near 35, though volume divergence hints at short covering. Any sustained close above $62 (WTI) or $65 (Brent) could trigger algorithmic buy programs toward $70, but below $55, downside accelerates to $52.40, the next historical support from 2021.

Medium-Term Outlook: Glut Now, Deficit Later

Analysts at Saxo Bank expect 2026 to mark the final year of significant oversupply before a structural deficit emerges after 2027. The IEA’s policy shift—abandoning its 2030 “peak oil demand” view and forecasting 113 million bpd demand by 2050—underscores a longer-term bullish foundation.

Underinvestment remains the dominant risk. Upstream capital expenditure has dropped nearly 25% since 2019, while demand linked to AI data centers, aviation, and industrial transport continues to expand. Saudi Aramco CEO Amin Nasser warned the energy transition is “an addition, not a replacement,” highlighting the need for new investment to avert a supply crunch.

Market Sentiment and Speculative Positioning

Money managers reduced net long positions by 12% last week, the largest cut since August. The CFTC data shows hedge funds now hold fewer than 160,000 net long contracts, down from 280,000 in October, reflecting collapsing conviction. Yet refinery margins remain robust—diesel cracks at $33 per barrel and jet fuel spreads at $28—implying physical markets are tighter than futures suggest.

Final Assessment — Buy, Sell, or Hold

Despite near-term weakness, fundamentals argue for stabilization. Inventories, while elevated, are concentrated offshore rather than in consumption hubs. Demand growth remains positive, OPEC+ cohesion is intact, and sanctions continue to constrain supply flexibility.

Given WTI at $57 and Brent at $61, the market appears undervalued relative to 2026 balance projections. The downside risk to $55 is limited unless global recession fears intensify. On balance, the setup favors accumulation on dips.

Verdict: WTI (CL=F) — Buy on weakness toward $56.50, Target $70 by Q2 2026
Brent (BZ=F) — Hold near $61, Accumulate below $60, Upside Target $75

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