Oil prices continuing to decrease despite recent recovery following conflict-induced surge
In a significant shift for the global oil market, Saudi Arabia increased its exports by nearly 700,000 barrels per day in June, marking a notable increase in supply. This surge comes amidst expectations of another round of output increases from OPEC+, which is set to approve these increases this weekend.
The global oil demand in 2025 is projected to grow at the slowest pace in over two decades, excluding global crises, at just 870,000 barrels per day. This slow growth, combined with increasing supply, is expected to lead to more oil being available on the market than is needed, causing prices to decline.
According to S&P Global Commodity Insights, the projected oil price range for 2026 is between $50 and $60 per barrel for Brent crude and possibly dropping into the upper $40s per barrel for WTI. These forecasts align closely with figures from related sources, indicating Brent crude prices averaging around $59 per barrel and WTI around $55 per barrel in 2026.
The reason for the lower oil prices is that global oil supply is growing faster than demand. OPEC+ countries are ramping up supply faster than expected, and an oil surplus is expected in 2026. S&P Global expects Brent crude to trade between $50 and $60 per barrel into 2026, while WTI is currently hovering near $65 per barrel.
Saudi Arabia is keen to reclaim market share in the oil market, and more than 4 million barrels per day of untapped capacity remain in Middle East oil flows. The second half of 2022 is expected to see oil supply exceed demand by 1.2 million barrels per day, marking the first year-on-year drop in U.S. oil production in a decade. U.S. production is forecast to decline by 600,000 barrels per day between mid-2025 and the end of 2026.
Jim Burkhard, Vice President and Global Head of Crude Oil Research at S&P Global, stated that the oil price trend remains downward. For UAE businesses, traders, and energy watchers, the focus should shift towards long-term trends steering oil prices lower, as Iranian exports could potentially climb further if sanctions ease, according to analysts. The price surge seen after the Israel-Iran flare-up has fully reversed, indicating a stabilising market.
- The slow growth in global oil demand and the increasing supply could negatively impact the finance sector, as lower oil prices may lead to reduced revenue for oil-and-gas companies and related businesses.
- The declining oil prices could have implications for the news industry, as analysts predict a shift towards long-term trends and geopolitical events that may influence oil prices, such as potential easing of Iranian sanctions.
- In the business world, the projected oil price range for 2026 could impact the finance and energy industries, with S&P Global Commodity Insights forecasting Brent crude prices between $50 and $60 per barrel, and WTI prices possibly dropping into the upper $40s per barrel.
- For industries reliant on oil and gas, such as transportation and manufacturing, the expected surplus of oil in 2026 could result in increased competition and potentially lower profits, due to the anticipated decline in oil prices.
