Surplus keeps Brent near $58, but long-term supply risks loom

The global oil market heads into 2026 with contrasting narratives: a near-term surplus that promises softer prices and a structural supply challenge that could drive volatility later in the decade.

- Somshankar Bandyopadhyay [e-mail]

Oil consumption is now projected to rise well beyond 2040, potentially approaching 2050. – FILE PHOTO

Oxford Economics forecasts Brent crude to end 2026 at around $58 per barrel, easing to $55 in 2027 — well below consensus expectations — on the back of a persistent surplus exceeding 2 million barrels per day (mbpd). This abundance stems from robust supply growth, projected at 1.6 mbpd next year, lifting global output to roughly 106 mbpd, while demand rises more modestly to 104 mbpd.

The supply upgrade reflects stronger-than-expected US shale resilience and faster ramp-up of Brazilian projects. Despite falling rig counts and West Texas Intermediate (WTI) prices expected below $55, productivity gains and longer laterals are enabling US output to grow by about 400,000 barrels per day. Latin America remains a standout contributor, with Brazil and Guyana adding around 1.6 mbpd across 2025-26. Opec is also set to unwind production cuts gradually in the second half of 2026, adding nearly 1 mbpd, primarily from Saudi Arabia and the UAE.