Oil price prediction: WTI may hit $57 by 2025-end, eyes supply glut in 2026

Oil price outlook: While the outlook for the oil market remains bearish with expectations for a large surplus in 2026, robust refinery margins offer counterbalance

Oil trapped between supply fear and Russia-Ukraine chaos

 

Volatility in global crude oil prices has eased over the past six weeks, buoyed by reduced Middle-eastern geopolitical risks following the October 9, 2025, Israel-Hamas ceasefire agreement under US President Donald Trump's 20-point Gaza peace plan. However, the protracted Ukraine-Russia conflict persists as the primary price floor, sustaining WTI near $60/bbl and Brent around $65/bbl, amid Ukrainian strikes on Russian refineries and US sanctions curbing 5 per cent of global output from Rosneft and Lukoil. 

 

The robust Opec+ and non-Opec production growth up 5 million bpd year-to-date has tipped the market into a  million bpd surplus by end-October, reflected in a 15 per cent year-to-date price decline.

 

Geo-political and sanction fears support prices

 

Crude oil prices have an underlying support from escalating geopolitical risks, particularly around Russia and Venezuela, offsetting surplus pressures. Bloomberg data reveals Russia's seaborne crude exports fell to 3.36 million bpd in the four weeks ending November 16 -- down 90,000 bpd from the prior week and the lowest in three months -- amid US sanctions on Rosneft and Lukoil, stranding up to 1.4 million bpd at sea. 

 

This compounds a fuel crunch, with Ukraine's drone strikes targeting at least 28 Russian refineries over the past three months, knocking out 13-20 per cent of Russia's 6.6 million bpd refining capacity by late October, and curbing output by up to 1.1 million bpd.

 

Adding to supply vulnerabilities, the US has amassed 15,000 troops, warships, and F-35s in the Caribbean for potential strikes on Venezuelan drug-linked targets, threatening disruptions from the Opec nation's 1-1.1 million bpd heavy crude output. Renewed EU sanctions speculation intensifies after the bloc's top diplomat, citing Russia's aggression toward Poland, pushed the 19th package targeting energy firms, shadow fleet tankers, and third-country enablers like Chinese refineries. 

 

Fresh US-EU measures on Russian oil infrastructure have further eroded exports, injecting a risk premium and stabilizing Brent near $64/bbl despite OPEC's revised Q3 surplus forecast.

 

Expected oil supply glut in 2026

 

EIA, IEA, and OPEC all anticipate a global oil surplus in 2026, driven by robust non-Opec+ supply growth outpacing demand. IEA projects the largest at 4.09 million bpd, citing Opec+ restorations and US production surges glutting the market, with supply up 2.5 million bpd to 108.7 million bpd amid tepid 770,000 bpd demand growth. EIA forecasts rising inventories through 2026 as production exceeds consumption, Opec+ on November 2 approved a 137,000 bpd hike for December, pausing Q1-2026 increments amid emerging surpluses. Opec's October crude output rose 50,000 bpd to 29.07 million bpd, the highest in 2.5 years.

 

 Floating oil tankers

 

The weekly data from oil vessel tracking firm showed that crude oil stored on tankers that have been stationary for at least 7 days rose 1.1 per cent week-on-week to 103.41 million bbls in the week ended November 14, the highest level since June 2024. This is a clear sign of weakening demand.

 

 Weakening Asian macros

 

In China, industrial production slowed to 4.9 per cent Y-o-Y in October (consensus: 5.5 per cent; September: 6.5 per cent), while the 2.9 per cent Y-o-Y growth for retail sales (consensus: 2.8 per cent) also remained far short of the country's 5.0-per cent growth target. 

 

The property market saw an accelerated price decline, while sharp sales contraction on last year's high base raised the risk of renewed credit stress. On the other hand, India's October trade deficit widened to $4.2 billion (Bloomberg consensus: $3 billion) vs $3.2 billion in September. October exports declined 11.8 per cent Y-o-Y vs 6.8 per cent growth in September. Meanwhile, imports rose 16.6 per cent Y-o-Y vs 16.7 per cent in September. This would add pressure  on oil demand.

 

Oil price outlook and prediction 

 

While the outlook for the oil market remains bearish with expectations for a large surplus in 2026, robust refinery margins offer counterbalance, with the 3:2:1 crude crack spread hitting a 19-month high on Tuesday amid outages and Russian product curbs, spurring refiners to ramp crude buys for gasoline and distillate. 

 

Yet, much of this stems from supply fears, not demand strength. We see WTI trading $58.50-$62 short-term, sliding to $57 by year-end amid surplus pressures.    =======  Disclaimer: Mohammed Imran is a research analyst at Mirae Asset Sharekhan. Views expressed are his own.