Oil prices face bearish pressure from potential Russian supply disruptions

Mohammed Imran, research analyst at Mirae Asset Sharekhan believes that global market will remain in surplus of 0.5-0.7mbpd in 2026

Geo-political risk to support crude oil in short-term

WTI crude lingers near $60 and Brent around $65 over the past three weeks amid absent fresh economic catalysts, though prices have gained 2 per cent monthly and 3.5 per cent over three months, yet remain down 15 per cent YTD. This stability could shift rapidly due to Ukraine's escalating November drone strikes, with at least five major attacks this month alone, collectively damaging or halting over 38 per cent of Russia's refining capacity—up from 18-20 per cent in the prior three months.  The campaign has triggered fuel shortages, rationing in occupied Crimea, a 17 per cent drop in September refined product exports, and a 9.5 per cent rise in Russian gasoline prices since February 2025, intensifying economic pressure and potentially tightening global supply. 

 

Ukraine Drone attack

Date	Target Location	Operator	Capacity (tons/year)	Reported Damage
Nov 11	Orsk (Orenburg)	Independent	6.6M	Explosions
Nov 11	Saratov	Rosneft	4.8M	Massive fire; 7th hit in 2025
Nov 6	Volgograd	Lukoil	15.7M	Halt in primary unit & hydrocracker
Nov 5	Nizhny Novgorod (Kstovo)	Lukoil	12M	Hit during repairs
Nov 2	Tuapse (Black Sea port)	Rosneft	N/A (terminal)	Fire damaged tankers & infrastructure

India and China still seeking Russian energy

China is intensifying efforts to import US-sanctioned Russian liquefied natural gas (LNG), developing a nascent domestic “shadow fleet” to transport the fuel and bypass Western restrictions. Beijing is pursuing these seaborne imports to diversify supply and deepen ties with Moscow, while India is still buying cheap Russian oil as  Kpler's ship-tracking data highlights a slight October rebound after a Q3 dip, driven by discounts and pre-sanction stockpiling.  Imports are projected to remain elevated (1.5–1.9 million bpd) through mid-November but could drop to 250,000–350,000 bpd by December as refiners pivot to the U.S., Middle East, Latin America, and West Africa.

OPEC+ & US adding to glut fear

OPEC+ at its November 2 meeting announced that members will raise production by +137,000 bpd in December but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus.  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. But commercial reserves are down -5.3 per cent below the seasonal 5-year average, gasoline inventories were -4.3 per cent below the seasonal 5-year average, and distillate inventories were -8.8 per cent below the 5-year seasonal average.   We believe that global market will remain in surplus of 0.5-0.7mbpd in 2026.

Macro-development

The weaker factory activities may prompt Chinese policymakers to introduce additional easing measures, although the scale is likely to be more moderate than last year. China’s exports slumped to negative in Oct as exports to developed countries including the US, EU, Japan, Australia etc saw notable drops. Exports to emerging markets including ASEAN, Africa and Latin America also moderated. Looking forward, we expect China’s export growth to decelerate from 5.9 per cent in 2024 to 3 per cent in 2025 while import growth may mildly slow down from 1.1 per cent to 0.5 per cent On positive side deflation is showing bottoming out as China’s CPI Y-o-Y recovered to 0.2 per cent in Oct from -0.3 per cent in Sep, above market expectation at -0.1 per cent. The drag from food narrowed to -2.9 per cent Y-o-Y in Oct from -4.4 per cent. In sequential terms, CPI rebounded to 0.2 per cent from 0.1 per cent in Sep.

Oil Market Outlook

While the outlook for the oil market remains bearish with expectations for a large surplus in 2026, there are clear and obvious risks in the form of potential disruptions to Russian oil flows. Furthermore, the continued strength seen in refinery margins provides some resistance to the bearish outlook for the crude market. However, a large part of the strength seen in refinery margins is driven by supply concerns rather than due to stronger demand. Short-term geo-political risk could see WTI testing $63-$65.

 

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