Crude oil price outlook: Brent crude to average $56 in 2026, WTI near $49

2026 Global oil market outlook: Navigating the 'great surplus'

Oil prices retreated sharply as the risk of war between the US and Iran temporarily de-escalated. President Trump signalled that he may hold off on attacking Iran for now, after the country pledged not to execute protesters. Additional selling pressure came from a strengthening US dollar, which drifted to six-week highs, as many Fed policymakers vouched for holding rates steady before further cuts. Meanwhile, US weekly EIA inventory data showed a jump in crude and gasoline supplies.

China’s imports stay strong

China has been refilling its storage on a war footing, citing future geopolitical developments (China–Taiwan) that could have ripple effects on Chinese supplies. Chinese refineries have stockpiled between 1.2 and 1.4 billion barrels of oil as of the end of 2025, which would account for three months of cover if oil imports to China were cut off.

 

The world’s largest crude consumer imported 557.73 million tons of crude oil in 2025, or 11.55 million bpd, up 4.4 per cent from a year earlier.

OPEC+ strategy: Reclaiming market share

OPEC+ faces a strategic dilemma in 2026. After years of defending price floors through production cuts, the group has shifted toward a more volume-focused strategy. Saudi Arabia and Qatar not allowing the US to use their airspace to carry out an attack on Iran signals a strategic development for OPEC’s long-term survival, as Iran’s fallout would be catastrophic for the oil cartel’s existence at a time when the US has taken control of Venezuelan oil.

US inventories, production

At 422 million barrels, US inventories are down 3 per cent from five-year average inventory levels. However, gasoline inventories rose by 9 million barrels last week, while gasoline demand averages around 8.5 mbpd, and production drifted lower to 13.71 mbpd in a seasonally weak period. Despite lower prices, US crude production is expected to remain resilient at roughly 13.6 mbpd, as efficiency gains and “behind-the-meter” energy solutions for data centres keep the domestic energy sector robust.

Demand, supply scenario: The 2026 glut

The fundamental imbalance between supply and demand is the defining feature of the current market.

 

Demand: Global oil demand is projected to grow by approximately 1.1 to 1.3 million barrels per day in 2026. While positive, this is significantly lower than post-pandemic surges. Growth is now primarily driven by petrochemical feedstocks and aviation rather than traditional road transport.

 

Supply: In contrast, global production is expected to rise by 1.4 to 2.1 mbpd. The Americas (US, Brazil, and Guyana) continue to pump at record or near-record levels, while OPEC+ is signalling a pause in output at current levels after restoring 3 per cent of global output in 2025, which has added to supply glut fears.

Outlook

We expect Brent crude to average $56 per barrel in 2026, while WTI is expected to hover near $49 per barrel. Global inventories are expected to build by an average of 2.8 mbpd through the first half of the year, marking the largest surplus in recent memory.

  ==================================== 

(Disclaimer: This article is by Mohammed Imran, research analyst at Mirae Asset Sharekhan. Views expressed are his own.)