The International Energy Agency (IEA) forecasts a global supply surplus of more than 4 million barrels per day next year. The expected rise in oil supply by 2.5 million barrels per day contrasts with a demand increase of only 770,000 barrels per day.

OPEC predicts an oil market oversupply in the first half of 2026, but a possible deficit in the second half may balance it out. The organisation assumes OPEC+ production will remain steady, indicating no room for production increases without leading to oversupply.

Us Energy Information Administration Forecast

The US Energy Information Administration (EIA) also foresees a surplus, estimating 2.2 million barrels per day in excess next year. As a result, Brent crude oil prices may drop to an average of USD 55 per barrel. The EIA anticipates US crude oil production will reach 13.86 million barrels per day this month, with a subsequent decline.

Despite this, they still project a slight uptick in US production next year. Meanwhile, global oil inventories in September reached a four-year high, with much of the stockpiling occurring in oil tankers, and OECD countries’ inventories also returned to a five-year average.

Given the widespread expectation of a significant oil market oversupply for 2026, the path of least resistance for prices appears to be downwards. With various agencies forecasting a supply glut, we are seeing Brent crude oil struggle to hold levels above the low $60s. This suggests that traders should view any short-term strength as an opportunity to initiate bearish positions.

Opportunities In The Current Market Environment

We believe this is a compelling environment for buying put options or establishing bear put spreads on crude futures. With implied volatility somewhat elevated due to uncertainty, spreads can help manage the cost of entry while positioning for a decline towards the EIA’s forecast of a $55 average price next year. The current market structure appears vulnerable to a slide, especially as we head into the lower-demand winter months for gasoline.

The most important event on the horizon is the upcoming OPEC+ meeting on December 5th. Since the group’s own report indicates no room to increase production without creating a surplus, the market will be hypersensitive to any discussion of extending or deepening cuts. We recall the sharp market reaction to their surprise production cuts back in 2023, and a similar move could quickly unravel bearish trades.

The fundamental data supports a weaker market, as global oil inventories reached a four-year high back in September 2025. Adding to this, recent data from Baker Hughes shows the US oil rig count has stalled near 615 rigs, reinforcing the view that American production is plateauing after hitting a record this month. This combination of high existing stockpiles and peaking non-OPEC supply growth adds weight to the oversupply narrative.

On the demand side, the outlook remains muted, consistent with forecasts for weak consumption growth next year. For instance, China’s official manufacturing PMI for October registered at 49.8, the second straight month of contraction, dampening hopes for a strong recovery in consumption. This sluggish economic activity from the world’s largest importer provides little reason to expect a sudden surge in oil demand.

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