Bearish oil outlook: Supply surplus, soft demand to cap WTI near $62

Crude oil Outlook: WTI to trade $57-$62/bbl near-term, with upside to $65+ on Russian disruptions. Bearish base case holds unless geopolitics escalate.

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Weak Manufacturing weigh on oil demand

 

Global crude oil prices are heading for a second straight weekly loss, with WTI hovering around $59.60, down 2.5 per cent over two weeks, driven by demand concerns. Saudi Arabia on Thursday slashed prices for its main crude grade to Asia for December delivery to the lowest in 11 months, signalling weakening demand from the world's strongest oil-consuming region. Oil prices are down 17 per cent YTD, despite occasional geopolitical support.

 

Macro Development

 

Global macroeconomic data releases across the US, Europe, and China for October 2025 underscored a broader slowdown in factory activities, with new orders and output contracting amid trade uncertainties and weak demand. The US ISM Manufacturing PMI fell to 48.7, signalling contraction for the eighth straight month, while the ISM Services PMI held at 52.4, reflecting resilience in non-manufacturing. China’s NBS Manufacturing PMI dropped to 49.0 a six-month low highlighting weak export orders and tariff impacts, with the Composite PMI at 50.0. In Europe, the Eurozone Composite PMI slipped to 50.8, Germany’s Ifo Business Climate Index weakened to 86.5, Overall, global manufacturing remained in contraction, reinforcing concerns over demand and growth.

 

OPEC+ & US to glut the markets

 

The global oil market is headed for a supply glut, driven by increased production from OPEC+ and the US. OPEC+ has restored nearly 3 per cent of global output since April, with 1.2 million bpd still to add, while US crude production hit a record 13.65 million bpd, pushing inventories up 5.2 million barrels last week amid 873,000 b/d import surge. However, refined products showed strength, with gasoline stocks dropping 4.73 million barrels lowest since November 2022. The IEA forecasts a 4.0 million bpd surplus in 2026, up from October’s estimate, as OPEC output rose 50,000 bpd to 29.07 million bpd, the highest in 2.5 years. Despite 740 kb/d demand growth in 2025, a 0.75 million bpd surplus persists, keeping prices under pressure.

 

Never ending Russia-Ukraine war

 

The Ukraine-Russian war has so far provided some support to oil prices as the US and its allies has further imposed sanctions on Russian oil companies, infrastructure, and tankers have also curbed Russian oil exports. So far Ukraine has targeted at least 28 Russian refineries over the past three months, exacerbating a fuel crunch in Russia and limiting Russia's crude export capabilities.  Ukrainian drone and missile attacks on Russian refineries and oil export terminals curbed Russia's total seaborne fuel shipments to 1.88 million bpd in the first ten days of October, the lowest average in over 3.25 years, and have knocked out 15 per cent-20 per cent of Russia's refining capacity by the end of October, curbing production by as much as 1.1 million bpd.

Oil Market Outlook 

While the oil market outlook remains bearish with an expected surplus of above 1.5mbpd in 2026, driven by non-OPEC+ growth (1.2 million bpd) and OPEC+ output restoration (2.85 million bpd since April), Price Outlook: WTI to trade $57–$62/bbl near-term, with upside to $65+ on Russian disruptions. Bearish base case holds unless geopolitics escalate.

 

(Disclaimer: Mohammed Imran is a research analyst at Mirae Asset Sharekhan. Views expressed are his own.)