The US Energy Information Administration (EIA) has updated its forecasts for crude oil production in the US. It’s expected that production will peak at 13.87 million barrels per day in October and stay at that level until the end of the year. However, a decline is predicted by early 2026. A global supply surplus of about 2 million barrels per day is expected next year. This surplus could push Brent crude oil prices down to around $55 per barrel.

Strategic Reserve Builds

China’s efforts to build its strategic reserves, along with lower-than-expected production from OPEC+, might help support prices. The EIA reports that China’s reserve-building and OPEC+’s struggles to meet production targets may lessen the impacts of the supply surplus. Even with mostly negative forecasts, these factors could bring some stability to the global oil market, according to the report. With US crude production reaching a record 13.87 million barrels per day last October, we are facing a market with a lot of supply. This output level is expected to continue through the end of this year, which could create downward pressure on prices. Currently, Brent is trading around $72, and it seems likely that prices will decrease as we head into 2026. This means traders might want to prepare for lower prices in the coming weeks, especially for contracts that expire in the first and second quarters of 2026. Taking bearish positions, like buying put options or selling call spreads on WTI and Brent, fits with the forecast of an average price of $55 next year. This represents a significant drop from current prices, indicating a strong potential trend.

Economic Indicators

We’ve seen something similar before, especially during the 2014-2016 oil glut from the first US shale boom. Back then, a long period of oversupply caused prices to fall from over $100 to the $30s. The current situation, with the expected 2 million barrel per day surplus, reflects that time and hints at a possible extended downturn. However, we should keep an eye on factors that could limit price drops, creating volatility and potential short-term spikes. Following OPEC+’s meeting in December 2025, news indicated they plan to continue their production cuts, but reports suggest some members may not comply fully, which could lead to underproduction. China’s intention to build up its strategic reserves will also help absorb some excess supply, offering support for prices. The overall economic landscape also backs the bearish outlook for oil. November’s US inflation rates showed a stubborn 3.1%, suggesting that central banks might keep interest rates high. This usually slows economic growth, which can reduce global oil demand. Concerns about a mild global recession in 2026 are also weighing on the market. Create your live VT Markets account and start trading now.

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