Global oil glut defies geopolitics, drives prices down

Patrick Drennan states that increasing supply and weakening demand are putting geopolitics under pressure and oil prices are heading towards the expected decline in 2026.

AMERICAN Energy Information Administration (EIA) guess It is predicted that the Brent crude oil price will average 56 dollars per barrel in 2026, that is, 19% lower than in 2025.

This is good news for consumers, but not so good for manufacturers. American shale-fractured oil producers cannot operate profitably at this price.

OPEC+ (Saudi Arabia, Russia, Iraq and the UAE) determine the world oil price by controlling how much oil it releases to the international market. Lately they’ve been restricting supply and punishing malicious people in the organization.

Meanwhile, Russia is currently selling oil below the OPEC+ agreed price to finance its war in Ukraine.

American sanctions and Ukrainian missile and drone attacks have slowed down Russian oil refining. But Russia is evading the latest US sanctions on big companies Rosneft And Lukoil and now supplies most of its crude oil to China and India through new intermediaries.

Lukoil, one of the sanctioned companies, has difficult-to-resolve joint ventures in Iraq, Egypt, Bulgaria, Mexico, Romania and Colombia. Most Russian oil continues to be extracted in Western Siberia, especially in the Khanty-Mansi and Yamalo-Nenets regions, and is transported to China. East Siberia-Pacific Ocean Oil Pipeline.

Biggest oil users: China and India

India is one of the world’s largest economies that expects to increase oil demand due to increasing industrial use. Additionally, India’s number of passenger vehicles is expected to increase. grow almost fivefold From 2024 to 2050.

China is a big user but is giving up on oil. of china alternative energy growthburgeoning electric vehicle industry and big government subsidies for electric vehicles affects oil demand.

there is china Intensive support for Russia will continue to buy sanctioned Russian oil. India promises to import more American and Venezuelan oil, but oil processing industry Tightly intertwined with Russian companies (Rosneft owns 49% of the refinery company in India. Nayara Energy) and will continue to refine cheaper Russian oil for domestic use.

Venezuelan

Crude oil exports from Venezuela could eventually approach roughly 500,000 barrels per day Venezuela shipped before American sanctions began in 2017. Sanctions were lifted after American special forces arrested the President of Venezuela. Nicolas Maduro In January 2026. It will take some time to extract extra production from Venezuela’s antiquated oil infrastructure, but it will increase the international oil glut.

Legality of Maduro’s arrest and oil payment structure The decision will be made this year through a Qatari bank.

America

Oil drilling is underway in America decreasing and domestic demand is slowing marginally. American refineries were operating at 90.5 percent capacity, down from 90.9% At the beginning of February. American producers will hope that refining Venezuelan crude and rising oil demand over the summer will help, but that’s not a sure thing. EIA also predicted low domestic demand due to the electrification of transport carriers.

America’s oil production is mainly shale cracked oilIt is more expensive to produce than conventional oil drilling by overseas competitors. This situation is exacerbated by increased supplies of conventional oil from non-OPEC+ producers Guyana, Canada, Angola and Brazil.

rest of the world

Europe’s oil demand will continue in 2026 downward pressureEast Asia became a net importer of oil as demand in countries such as Indonesia and Malaysia exceeded domestic production. They import oil from somewhere various countries.

Australia is completely dependent on imported refined oil, especially from East Asia. It will gradually increase in 2026 Importing refined oil from India (tariff-free), ironically supplied by Russia.

Oil demand in 2026 becomes increasingly dependent petrochemical raw materials (naphtha, ethane, LPG) instead of just gasoline.

In summary, the international market is flooded with oil despite OPEC+ and American producers trying to slow supply and keep prices high. Even geopolitical issues with Russia, Venezuela and Iran cannot slow production, and further regime change could produce more oil. All this is offset by less demand. Domestic oil consumers’ expectations in 2026 are good.