Supply Shocks To Super Glut: Oil Prices Weaken — Is The Downcycle Here To Stay?
So far this year, oil has been among the weakest major commodities. Brent is down about 18–20% year-to-date, while WTI has fallen roughly 22–23%.
Oil prices are under sustained pressure as fears of a global supply glut overpower sporadic supply disruptions, raising the prospect of a prolonged period of cheaper crude. Brent has slipped to $60 per barrel for the first time since May, with both Brent and WTI falling more than 4% last week. Slowing factory output growth in China has added to demand concerns, reinforcing the bearish mood.
So far this year, oil has been among the weakest major commodities. Brent is down about 18–20% year-to-date, while WTI has fallen roughly 22–23%.
Historical pricing trends point in the same direction. According to the IEA’s December report, North Sea Dated crude averaged $63.63 per barrel, down about $1 per barrel month-on-month. This marked its fifth consecutive monthly decline, the longest losing streak in 11 years, highlighting the persistence of downside pressure.
At the heart of the decline is a widening gap between demand and supply. Global oil demand is expected to grow by 830,000 barrels per day in 2025 and 860,000 bpd in 2026, but supply growth is running far ahead. Global output is projected to rise by 2.4 million bpd in 2026, leaving an implied surplus of nearly 3.7 million bpd, or close to 4% of global consumption, according to the IEA.
The oversupply is being driven by new barrels coming online even as demand growth softens. Production increases from the US, Brazil, Canada and Guyana continue to outpace consumption, creating what analysts describe as a “super glut” — simply too much oil chasing insufficient demand.
Major agencies are now converging on a lower-for-longer outlook. The U.S. Energy Information Administration expects global inventories to keep rising through 2026, forecasting Brent crude to fall to around $55 per barrel and remain near that level for most of the year. WTI is seen averaging $51 in 2026, according to the EIA.
Demand, however, is not collapsing. The IEA has slightly raised its 2026 demand growth estimates, suggesting consumption is still expanding—just not fast enough to absorb the surge in supply.
Views diverge between OPEC and global banks. OPEC sees oil demand reaching 43 million bpd in 2026, broadly matching current production levels, and has signalled readiness to defend prices if required. In contrast, Goldman Sachs forecasts Brent at $56 and WTI at $52 in 2026, citing a 2 million bpd surplus. Morgan Stanley has lifted its first-half 2026 Brent forecast to $60, betting that OPEC+ pausing quota hikes could offer some support.
The bigger question is whether crude has entered a new pricing regime. With markets increasingly ignoring isolated supply shocks and focusing instead on the scale of oversupply, analysts are asking if oil’s centre of gravity has shifted to the mid-$50s or sub-$60 range.
For consumers, this could translate into cheaper fuel and more relief into next year. For producers, the environment points to margin pressure and tougher strategic choices. As the supply overhang grows, the balance of power in the oil market may be undergoing a fundamental reset.
