Oil Price Forecast - WTI Crude Falls to $57.78 and Brent at $61.48 as Oversupply Outpaces Demand

Oil Market Overview: WTI (CL=F) and Brent (BZ=F) Slip Below Key Levels as Oversupply Deepens

WTI Crude Struggles to Hold $58 Amid Persistent Supply Pressure

West Texas Intermediate (CL=F) traded at $57.78, down 0.81%, as the market extended its decline driven by structural oversupply and weak global demand. The $58 support zone — tested repeatedly since November — remains the last technical barrier before deeper losses toward $55.
Trading patterns reveal sellers dominating intraday rallies, with every short-term recovery above $59 met by aggressive shorting. The 50-day EMA near $60 acts as a strong resistance ceiling, consistently attracting profit-taking from funds unwilling to risk exposure ahead of the Federal Reserve’s upcoming policy shift.
U.S. output continues to weigh heavily: production remains near 13.3 million barrels per day, close to record highs, while U.S. crude inventories only recently fell by 1.8 million barrels, far short of what’s needed to stabilize price action. The domestic oversupply, coupled with softening Chinese import volumes, reinforces the bearish technical setup.

Brent (BZ=F) Slips Below $62 as Global Benchmarks Turn Defensive

Brent crude futures dropped 1.07% to $61.48, breaking a two-week support line that had held near $62. The failure to sustain that threshold indicates renewed weakness despite OPEC+’s attempt to pause additional output increases in early 2026. Analysts warn that if Brent breaks decisively below $60, the next support stands near $58.50, a level unseen since the second quarter of 2023.
The downtrend stems primarily from a mismatch between production and consumption. OPEC+ output rose by 220,000 barrels per day in November, led by increases from Russia, Iran, and the United Arab Emirates. Meanwhile, weaker consumption in Europe and slower industrial growth in Asia continue to cap any upside.
Even Saudi Arabia’s recent export reductions have failed to lift sentiment, as Russian barrels continue to flood the market at steep discounts, particularly to India and China.

Chevron CEO Highlights Long-Term Demand Despite Short-Term Weakness

Chevron (NYSE:CVX) CEO Mike Wirth commented on Bloomberg that the current decline in oil prices — below $60 — reflects short-term cyclical softness, not a structural collapse in energy demand. Wirth underscored that global oil and gas consumption will remain robust through 2050, with fossil fuels retaining a dominant share of the global energy mix.
He also confirmed Chevron’s long-term investment stance, stating that exploration projects — such as the Gulf of Mexico field brought online last year after a 20-year development timeline — are planned on multi-decade horizons and insulated from near-term price volatility.
Chevron continues to streamline costs, leveraging AI-based geological data optimization and longer-lateral drilling to reduce breakeven costs from $70–$80 per barrel a decade ago to below $40 today. These efficiencies strengthen its free cash flow position, even amid lower prices.

Oversupply Expands Across Producers — OPEC+, North America, and Latin America

The global supply side remains dominant. North American producers, led by the U.S. and Canada, are pumping at historic highs. U.S. exports now exceed 5 million barrels per day, while Canadian output has crossed 4.8 million bpd for the first time.
Brazil, Guyana, and Argentina are rapidly scaling output, together adding an estimated 600,000 bpd of incremental supply in 2025. This expansion offsets OPEC+ production restraint and intensifies downward pressure on prices.
The OPEC+ alliance has paused further hikes for Q1 2026, but analysts see limited effect without demand recovery. The coalition’s internal data shows compliance at just 83%, suggesting members like Iraq and Nigeria continue overproducing.

Nigeria’s Push to Monetize Gas Flaring Reflects Broader Energy Transition Dynamics

In a related development, Nigeria’s NNPC and Heirs Energies signed a gas flare commercialization deal under the NGFCP, aiming to capture and utilize flared gas from OML 17. The agreement will support industrial gas, LPG, and CNG use, aligning with Nigeria’s long-term emission reduction targets.
Although this initiative will marginally improve domestic power generation, it highlights a structural theme — producers shifting to monetize secondary hydrocarbons amid falling oil margins. Nigeria seeks $10 billion in new investments and 400,000 bpd of new capacity over the next decade, yet persistent flaring and weak infrastructure continue to cap output efficiency.

Geopolitical Tensions Fail to Offset the Supply Shock

Despite heightened geopolitical risk — including renewed sanctions threats on Russian firms Lukoil and Rosneft, and Israeli approval of a $35 billion gas export deal with Egypt — crude prices continue to fall. Traders remain unconvinced that such developments will materially tighten supply.
Russian crude continues to move freely, with discounted barrels sold to Asia offsetting Western restrictions. At the same time, Kazakhstan rerouted Kashagan field flows after a Black Sea pipeline attack, but the disruption had minimal market impact. The persistence of alternative export channels underscores the global system’s ability to absorb localized shocks.

Technical Outlook: WTI and Brent Seek Bottom Formation

From a technical standpoint, both benchmarks remain in a short-term downtrend. WTI faces strong resistance at $60 (the 50-day EMA), with support near $57.50 and $55.80. Brent shows similar structure — capped at $63.20, supported at $60.
Momentum indicators remain bearish. RSI readings on both contracts hover near 38, reflecting subdued buying power. Volatility remains elevated, with intraday spreads widening beyond $1.50 per barrel, suggesting institutional selling into rallies.
The next 10-day window will determine if speculative shorts push WTI below $57, which could open a fast correction to $54. On the upside, only a sustained close above $61 would shift momentum to neutral.

Macro Outlook: Fed Policy and AI-Driven Energy Demand

The macro narrative is shifting as the Federal Reserve prepares a 25bps rate cut and launches $45 billion in monthly bond buybacks, which may improve liquidity across risk assets, including oil. However, slower global GDP growth (IMF forecasts 2.8% for 2026) limits upside demand potential.
Chevron and other major producers are exploring off-grid natural gas power generation for AI data centers — a new demand segment potentially adding 2 million barrels of oil equivalent per day in energy use over the next decade. If realized, this could create a long-term demand floor for natural gas-linked crude supply.

Short-Term Market Sentiment and Forecast

The short-term sentiment remains bearish, anchored by an imbalance of 2.1 million barrels per day between supply and demand. Inventory draws are insufficient, with U.S. commercial stocks still 8% above the five-year average.
However, any surprise in Fed easing, a reversal in Chinese import volumes, or deeper OPEC+ cuts could shift the bias. For now, traders view rallies as shorting opportunities rather than accumulation phases.

Buy/Sell/Hold Verdict — Bearish Bias Maintained

Based on supply dominance, technical weakness, and stagnant demand, the oil market remains Bearish in the short term.

• WTI (CL=F): Sell, target $55.00, stop above $61.00.

• Brent (BZ=F): Sell, target $59.00, stop above $63.50.
  If macro liquidity improves or inventories tighten materially, a neutral stance may emerge by late Q1 2026, but until then, the path of least resistance remains downward.

Verdict: Crude oil’s current structure reflects a market searching for balance in an oversupplied world. Unless demand rebounds or OPEC+ enforces deeper cuts, both WTI and Brent are likely to stay under pressure — maintaining a Sell outlook through early 2026.

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