Crude oil outlook for 2026 remains range-bound amid persistent supply glut

Crude oil market heads into 2026 after a challenging 2025, with prices falling over 17 per cent as rising supply, easing geopolitical risk premiums, and uneven demand weighed heavily on sentiment. Despite multiple flashpoints during the year, oil prices struggled to sustain rallies, highlighting the market’s growing sensitivity to excess supply, analysts said.

 

As of January 1, 2026, the oil price benchmark WTI Crude has fallen by around 17.73 per cent in the last year. At the time of writing, WTI Crude was 0.91 per cent down at $57.42 per barrel. 

 

According to data from the International Energy Agency (IEA) November report, global oil supply growth outpaced demand in 2025, leading to steady inventory builds across major consuming regions.

 

OPEC+ shifts from price defence to market share

According to analysts, one of the defining trends of 2025 was OPEC+’s strategic shift. After initially supporting prices through production curbs, the group accelerated the return of supply during the year, gradually shifting focus from defending prices to protecting market share.

 

From April to December, OPEC+ increased oil supply steadily, starting with about 138,000 barrels per day in April, ramping up to over 400,000 barrels per day in the middle of the year, peaking at nearly 550,000 barrels per day in August and September, and then slowing to around 137,000 barrels per day toward the end of the year, resulting in a total increase of nearly 2.9 million barrels per day.  ALSO READ | Vijay Kedia on the biggest investment mistake of 2025 and lessons for 2026 

“Supply, not demand, is the dominant driver heading into 2026. Demand is growing, but not fast enough to absorb the excess barrels already in the system,” said Navneet Damani, head of research (commodities) at Motilal Oswal Financial Services. 

 

Sanctioned barrels from Russia, Iran and Venezuela continued flowing, increasing oil-on-water storage and blunting disruption fears. Floating storage also grew as concerns around secondary tariffs pushed buyers of Russian crude towards alternative sources. Inventories built steadily through the year, with product stocks rising faster than crude inventories, he added.

Demand recovery remains uneven

On the demand side, growth remained intact but underwhelming. While China’s crude imports stayed strong, the majority of the inflow went into strategic and commercial storage rather than immediate consumption. Globally, weak manufacturing activity, reflected in subdued PMIs across major economies, and increasing electric vehicle adoption continued to cap demand growth.

 

Supply disruptions in regions such as Libya and Nigeria triggered only short-lived price spikes, as ample spare supply quickly offset losses.  ALSO READ | Crypto in 2026: Analysts predict stability and growth amid regulatory shift 

"Geopolitical events drove volatility, not direction, as demand remained missing; however, oversupply concerns remain in the backdrop," Damani said.

2026 outlook: Range-bound with downside risks

Looking ahead, analysts expect crude prices to remain under pressure unless supply adjusts meaningfully.

 

Prices are likely to average lower in 2026 compared to 2025, reflecting persistent oversupply and elevated inventories rather than a collapse in demand, said Kaveri More, commodity analyst at Choice Broking. She noted that OPEC+’s reduced pricing power, structurally high non-OPEC output, particularly from the US, and China’s diminished role as a swing consumer could keep prices range-bound.

 

On the charts, crude has repeatedly failed to break resistance levels at 5500-5900 or sustain above them, reinforcing a bearish-to-neutral outlook.   ALSO READ | Will Sensex hit 100,000 in 2026? Here's what market experts, charts suggest 

"The outlook leans bearish or range-bound; a breach below key support at 4900-4500 would heighten downside risks, signalling potential supply destruction needed for stabilisation," More said.

 

According to Damani, the key question for 2026 is how low prices must fall to force supply to respond. Until production is curtailed, downside pressure persists. Downside risks for prices remain open if supply discipline weakens or demand underperforms.

 

A durable recovery would require visible supply destruction, stronger end-demand, or decisive production cuts, none of which are evident yet.