Crude oil outlook: WTI seen at $55-60 as Asian demand offsets rising supply

Crude oil faces headwinds amid Supply glut fears in 2026

The global crude oil market is entering 2026 facing a complex interplay of rising non-OPEC+ supply, shifting demand dynamics in Asia, and the disruptive growth of electric vehicles (EVs). Forecasts from major energy bodies suggest a trend toward inventory builds and moderated prices, contingent on geopolitical stability and production policies. Oil prices have roughly lost 17 per cent of their value ytd.

Asia will lead the demand growth in 2026

Non-OECD countries, particularly in Asia, remain the primary engine of global oil demand growth. The Chinese imports surged 3 per cent to 522 million tons as of the end of November 2025. The EIA forecasts China's total liquid fuels consumption to increase by an additional 300 kb/d in 2026, driven by upward revisions to expected GDP growth. However, Chinese crude runs (refinery throughput) for 2026 have been trimmed slightly by the IEA, although increased floating inventories of cheaper Russian and Iranian crude could boost runs and exports. China also continues to build strategic stockpiles, which helps limit price declines.

 

India is expected to lead incremental global demand growth by 600–700 kb/d, becoming the second-largest energy importer after China. Crude imports totalled 244.5 MMT in FY 2024–25, with 206 million tons imported between January and October 2025. While delays in new refinery start-ups weigh on non-OECD crude runs, overall demand remains robust, reflecting strong economic expansion.

Global oil supply demand forecast

The Leading agencies (OPEC/IEA/EIA) anticipate a well-supplied market for 2026.

  IEA: Projects global oil demand growth of about 790kbp/d in 2026, reaching 104.79 million barrels per day (mb/d), while supplies are expected to rise by 2.4 million barrels a day to 108.6 million barrels in 2026, which would keep the market in surplus of 3.815mbpd.

 

OPEC: For 2026, OPEC continues to expect Oil-Demand Growth Forecast at 1.4mbpd, while supplies are expected to grow by 1.6 mbpd vs expected 1mbpd.

 

OPEC+: Despite rising global supply, OPEC+ is expected to maintain production restraint, with the EIA forecasting the group to produce about 1.3 mb/d less than its targeted production in 2026 to manage the market surplus. The IEA anticipates OPEC+ crude and NGLs will account for 890 kb/d of supply growth in 2026.

 

Non-OPEC+: The EIA forecasts non-OPEC+ liquid fuels production to grow by 1.0 mb/d in 2026. This growth is heavily concentrated in the Americas, with the United States, Brazil, Guyana, and Canada collectively contributing approximately 60 per cent (0.8 mb/d) of the total global growth in 2026. The U.S. Permian region remains a significant factor, with U.S. production of petroleum liquids expected to increase by 0.5 mb/d in 2026.

The EV Impact on Crude Oil Demand

The increasing adoption of Electric Vehicles (EVs) is a long-term structural headwind for crude oil demand, primarily displacing gasoline and diesel consumption in the transport sector. The IEA projects that growing global EV sales will displace over 5 mb/d of oil by 2030, with China's EVs accounting for half of that displaced oil.

 

China’s Impact: Gasoline demand averaged 3.36 mb/d in the first 10 months of 2025, down from 3.58 mb/d in 2024, reflecting EV penetration. EV sales surged to 12.46 million units in 2025 from 9.31 million units in 2024. 

 

Global Share: EVs are expected to represent 25 per cent of global vehicle sales in 2025, rising to 50 per cent by 2035. Headwinds for oil prices as it could displace a total of 10 mb/d of oil globally.

Global Economic Backdrop

Global economic health remains a key determinant of oil demand. Recent updates from major economies show mixed signals; we expect the global GDP to grow at 3 per cent in 2026.

 

US: Following the Federal Open Market Committee (FOMC) meeting, the focus has been on the monetary policy direction and inflation. Persistent, renewed tariff tensions between the US and China continue to create geopolitical uncertainty, impacting global risk sentiment and market volatility.

 

China: A sharp slowdown in the Chinese economy has been a concern, the overall growth in global trade, as noted by UNCTAD, is being driven by higher volumes rather than price increases, suggesting stable demand despite easing inflation. 

Price outlook

The 2026 crude oil market will be shaped by a delicate balance: robust non-OPEC+ supply creating an overhang, offset by disciplined OPEC+ policy and strong demand from Asia. Underinvestment in non-OPEC producers and the gradual decline of cheap US shale could alter dynamics later in the year.

 

WTI Price Forecast: Expected to average $54 per barrel in Q1 2026 and may trade in the range $55-$60/b level throughout the year, driven by rising global production and accelerating inventory accumulation.  (Disclaimer: This article is by Mohammed Imran, research analyst at Mirae Asset Sharekhan. Views expressed are his own.)