Global Oil Market Braces for Record Oversupply and Volatility in 2026

Amid a sluggish global economy, weak demand growth, rising supply and mounting geopolitical uncertainty, the international oil market is expected to face its most severe supply–demand imbalance on record in 2026, keeping prices low but highly volatile.

The persistent weakness of the global economy and the resulting slowdown in oil demand growth are failing to absorb steadily increasing global oil supply. As a result, the imbalance between supply and demand in the international oil market is projected to reach unprecedented levels in 2026. Combined with unpredictable policy shifts under the Trump administration in the United States, international crude oil prices are expected to remain at low levels while experiencing heightened volatility and sustained turbulence.

Supply–Demand Imbalance Set to Worsen

A gloomy global economic outlook and even weaker oil demand growth expectations have led major institutions to issue pessimistic forecasts for 2026. While estimates vary, there is broad consensus that global oil supply will grow significantly next year.

The International Energy Agency (IEA) forecasts that global oil supply will increase by 2.4 million barrels per day (bpd) in 2026, bringing total supply to 108.6 million bpd. OPEC expects non-OPEC oil production to rise by 600,000 bpd to 54.8 million bpd, while OPEC+ producers' natural gas liquids and non-conventional oil output is projected to grow by 100,000 bpd to 8.8 million bpd. The U.S. Energy Information Administration (EIA) estimates that, following a sharp increase of 3 million bpd in 2025, global oil supply will rise by a further 1.2 million bpd in 2026 to reach 107.43 million bpd.

With demand growth lagging behind supply expansion, many international institutions anticipate a severe market imbalance. In its December 11, 2025 Oil Market Report, the IEA projected that global oil supply in 2026 would exceed demand by 3.815 million bpd, a record surplus. In early December 2025, five major Wall Street institutions — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley — estimated an average oversupply of 2.2 million bpd in the global crude market in 2026. On December 9, 2025, global commodities trading giant Trafigura warned that additional supply colliding with an economic slowdown could trigger a 'super surplus' in the oil market.

Market sentiment has also turned increasingly bearish. A Goldman Sachs survey conducted between January 5 and 7, 2026, covering more than 1,100 multi-asset clients, showed that over 59% held bearish or slightly bearish views on crude oil, with sentiment approaching the most pessimistic levels seen since January 2016.

Geopolitical Risks Add Downward Pressure

Geopolitical developments — including the situation in Venezuela, unrest in Iran and the ongoing Russia–Ukraine conflict — are expected to generate sharp fluctuations in 2026, while overall exerting downward pressure on oil prices.

The seizure of Venezuelan President Nicolás Maduro by the United States triggered global attention, given Venezuela's vast oil reserves. However, the immediate market reaction was muted. International oil prices rose by about USD 1 per barrel on January 5, before falling over the following two trading days. Brent crude futures fell below USD 60 per barrel for the first time in 2026. Industry analysts believe that if Venezuela maintains stability, its oil production could increase by around 400,000 bpd in 2026, adding growing pressure to prices from the second half of the year. If the United States becomes deeply involved in reviving Venezuela's oil industry, production could gradually recover to more than 2–3 million bpd, creating significant long-term downside pressure on global oil prices, particularly from 2027 onward.

Iran has also seen protests in multiple regions since late 2025. The country's domestic situation and its nuclear issue are expected to remain among the largest uncertainties for the international community in 2026, with the potential to trigger sharp swings in oil prices.

The Russia–Ukraine conflict, which began in February 2022, has entered its fifth year and continues to affect global energy markets. In 2026, renewed diplomatic efforts toward a ceasefire are possible, as the prolonged conflict places increasing strain on both sides. A ceasefire or phased truce could lead the United States and the European Union to ease sanctions on Russia, allowing partial recovery of Russian oil and gas exports and exerting substantial downward pressure on oil prices. The prospect of a ceasefire and the restoration of Russian exports remains one of the most unpredictable factors shaping the 2026 oil market.

Beyond these risks, a volatile international environment and frequent natural disasters mean that unforeseen events are likely to continue disrupting the oil market and driving price fluctuations throughout the year.

Trump Administration Policies May Cap Prices

While pressuring Saudi Arabia and other producers to increase output and keep prices low, the unpredictability of President Donald Trump's policies is expected to fuel further volatility in 2026.

Since beginning his second term, Trump's policy announcements have often come abruptly, and the current U.S. administration has adopted an increasingly hardline stance on international issues, including military interventions. Notable examples include the 12-day conflict with Iran in June 2025 and the seizure of Venezuela's president on January 3, 2026. Similar episodes cannot be ruled out in 2026, potentially triggering sharp short-term swings in oil prices.

As 2026 is a U.S. midterm election year, maintaining oil prices around USD 55 per barrel would help keep domestic gasoline prices below USD 3 per gallon, bolstering voter support for the Trump administration. From a domestic political perspective, the U.S. government is therefore likely to push to keep international oil prices below USD 60 per barrel, with the interests of major U.S. oil companies potentially offset through access to overseas resources such as those in Venezuela.

Given these market fundamentals, many international institutions have adopted a notably bearish outlook for oil prices in 2026. In its December 9, 2025 report, Trafigura stated that with large volumes of new supply set to collide with weak demand, already low crude prices could weaken further in 2026.