Whalesbook
Global oil markets are getting ready for a major supply glut in 2026, with forecasts showing Brent crude averaging $56 per barrel and West Texas Intermediate (WTI) near $49. This prediction, called the 'great surplus', comes from a fundamental imbalance where supply is expected to grow much faster than demand.
Supply Surge vs. Demand Growth
Global oil production is predicted to increase by 1.4 to 2.1 million barrels per day (mbpd) in 2026. The Americas, especially the US, Brazil, and Guyana, are setting new records. At the same time, OPEC+ countries, after boosting global output by 3% in 2025, are hinting at a strategy change to win back market share instead of defending prices with production cuts. This move is aimed at securing the cartel's long-term survival, especially with the US having control over Venezuelan oil assets.
China's Strategic Stockpiling
Oil demand, while expected to grow by 1.1 to 1.3 mbpd in 2026, isn't keeping up with supply increases. Growth is increasingly dependent on petrochemical feedstocks and aviation, which is slower than traditional road transport. Still, China, the world's biggest crude consumer, imported 11.55 million bpd in 2025, a 4.4% rise year-on-year. The country has been actively refilling its strategic reserves, reportedly holding 1.2 to 1.4 billion barrels by the end of 2025, enough for three months if imports were interrupted.
US Inventory Dynamics
US crude inventories are at 422 million barrels, down 3% from the five-year average. However, gasoline stocks saw a big jump of 9 million barrels last week. US production, although seasonally lower at 13.71 mbpd, is expected to stay strong due to efficiency improvements and energy solutions for data centers.