Oil prices are under pressure, with ICE Brent falling below $62 per barrel, the lowest level since late October. The oil market is moving towards a predicted surplus, with more price pressure expected by 2026. The situation with Russian oil supply is uncertain; although export volumes are high, finding buyers for these barrels is challenging.

Challenges in Russian Oil Supply

There is a clear need for larger discounts on Urals oil to attract buyers and avoid dealing with sanctioned entities. If Russia cannot find buyers, oil output may begin to drop. However, Russia has managed to bypass sanctions and other challenges since 2022. Recent data from the American Petroleum Institute showed a drop of 4.8 million barrels in US crude oil inventories, much larger than the 1.3 million-barrel decline that traders expected. In the refined products sector, stocks increased significantly, with gasoline inventories up by 7 million barrels and distillate inventories rising by 1 million barrels. The EIA predicts that US crude oil production will reach 13.61 million barrels per day in 2025. However, this is expected to dip to 13.53 million barrels per day in 2026, down from a previous estimate of 13.58 million barrels per day due to low prices and less drilling activity. With ICE Brent now under $62 a barrel, it’s clear that the market believes in an oil surplus. This downward trend is likely to last into early 2026, creating chances for traders to take bearish positions. Traders may want to consider buying put options or creating bear call spreads on near-term contracts to take advantage of this outlook. US data presents a mixed but ultimately negative view on demand. Although crude inventories fell more than expected, the significant 7 million barrel increase in gasoline stocks raises concerns about consumption. US gasoline demand in November 2025 is nearly 3% lower than during the same period last year, indicating that refiner margins, or crack spreads, may weaken further in the upcoming weeks.

Global Demand and Economic Slowdown

Globally, the cautious outlook is supported by uncertainty around Russian supply. While we believe Russia will continue to redirect its oil as it has since 2022, slowing manufacturing in major markets like China, where the PMI has struggled to stay above the 50-point mark for months, dampens demand expectations. This overall economic softness strengthens the idea that supply will likely exceed consumption. The EIA’s forecast for record US production of 13.61 million barrels per day in 2025 adds to the current oversupply, despite expectations of a slight decline next year. This longer-term view suggests that today’s low prices may not last forever, making it wise to adopt defined-risk strategies. Utilizing put spreads on early 2026 contracts can help us profit from the current decline while limiting our exposure if the market begins to price in future production cuts. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now