Digging Behind Oil Price Projections In 2026 - A Three-Scenario Outlook

3rd December 2025

Oil in 2026: A Three-Scenario Outlook

1. Base Case — Gradual Softening: Brent around $55-65/barrel

In the "most likely" scenario, oil prices drift lower than 2025 but remain relatively stable — a soft landing rather than a crash.

Under this outcome:

Global supply continues to outpace demand growth, but not by an overwhelming amount. According to a recent poll of 35 economists and analysts, the global oil market is expected to remain oversupplied in 2026, but a combination of modest demand growth, output discipline (e.g., production pauses or modest increases) from major producers, and some underlying geopolitical risk keeps a floor under prices. The poll projects Brent crude at about $62.23 per barrel and U.S. crude (WTI) around $59/barrel.

Institutions such as the International Energy Agency (IEA) also forecast a significant global surplus next year — possibly as much as 4 million barrels per day but they indicate that demand will continue to grow (albeit slowly) and some supply cuts or natural attrition may keep the market from collapsing.
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Some mid-sized producers especially higher-cost or marginal barrels begin to scale back output or delay new investment if prices remain soft, helping to anchor prices. For instance, according to the Goldman Sachs commodities research unit, such a "supply wave" from recent investment booms could fade, reducing medium-term surplus pressure.

In this base case, oil stays above the worst-case trough, but we wouldn't see previous highs. The overall outlook: Brent in mid-to-high $50s or low $60s on average, with seasonal or temporary oscillations between low $50s and high $60s.

2. Bearish Glut Case — Oversupply + Weak Demand: Brent slides to $45-55/barrel

This is the risk-heavy, downside scenario driven by a combination of persistent oversupply, weak demand, and little corrective action from major producers. Arguments supporting this outcome:

The IEA projects that supply growth in 2025 and 2026 will outpace demand growth by a wide margin, producing a surplus of up to 4 million barrels per day — roughly 4% of global demand.

According to analysts at the J.P. Morgan commodity-research team, risks of demand softness and global economic headwinds (combined with rising supply from non-OPEC producers) point to a potential average price of $58/barrel for Brent in 2026 — while noting that in a deeper downturn, prices could fall further.

From the perspective of the major investment banks, the surplus could become prolonged. HSBC — among others — and other commodity strategists suggest the market might avoid rebalancing quickly because the cost of producing many barrels remains low, and producers may choose to maintain output rather than risk losing market share.

Should demand damage be exacerbated for example by global economic slowdown, accelerated energy-transition policies (e.g., EV rollout, energy efficiency, lower fossil-fuel demand), or sustained substitution toward renewables the downward pressure could intensify, pushing prices into the $45-50/barrel range. Some analysts describe this as a "return to late-2020-style prices," especially for lower-quality, high-cost production that becomes uneconomic when prices are depressed.

Under this bearish scenario, oil remains cheap or cheaper throughout 2026. Consumers drivers, shipping, airlines might benefit from lower fuel prices; but oil-producing countries, energy companies, and high-cost producers could suffer financially. Investment in new drilling or production capacity would likely stall, with knock-on effects for jobs and global investment in the sector.

3. Volatility Surprise Upside Case — $65-80/barrel but with sharp swings

While many forecasters warn of oversupply and soft demand, a non-negligible minority argue that 2026 could yet deliver substantial volatility — and possibly price spikes — driven mainly by geopolitical shocks, supply disruptions, or policy shifts.

Circumstances and arguments for this scenario

Political instability, sanctions, or conflict — especially in major producing regions (Middle East, parts of Africa, or Russia) — could disrupt supply at short notice. Given current global tensions, even a short supply interruption can lead to sharp spikes. Some traders and analysts argue that this risk premium will prevent a sustained price collapse.

Low prices in 2025–2026 may lead many non-OPEC or high-cost producers to wind down operations or defer new projects that could constrain medium-term supply growth and, if demand recovers or stays stable, leave the market tighter than expected.

Should the global economy surprise on the upside — for example, stronger growth in emerging markets, rebound in manufacturing, a delay in energy-transition uptake — demand could reaccelerate, tightening the balance and pushing prices up. In that event, some analysts suggest we could see Brent back into the $70–$80/barrel band (though such a sustained rally would likely require both strong demand and supply constraints or cuts).

Because of structural shifts — energy transition, volatility in supply, changing consumption patterns — the oil market might not return to its old "steady evolution" model. Instead, prices could bounce around a volatile band, making for a choppy 2026 with months of $50s interspersed with spikes.

This scenario doesn't guarantee a high average price — but it leaves open the possibility of sharp moves above $70/barrel if supply disruptions occur or demand remains more robust than expected.

Why These Scenarios — The Key Underlying Forces

To understand why analysts gravitate toward these three broad scenarios, it helps to look at the main structural drivers shaping the oil market today:

Supply surge: Output increases from both OPEC+ and non-OPEC countries, plus the winding-up of production cuts, mean that global oil supply is rising fast. The IEA estimates a surplus of up to 4 million barrels per day in 2026 under current trajectories.

Weak demand growth (or slower growth): Global demand growth is expected to be modest — in part due to economic headwinds, energy-efficiency gains, and the accelerating energy transition (more EVs, renewables, less fossil-fuel reliance).

Cost structure & resilience of producers: Many producers now operate at lower breakeven costs; some may tolerate lower prices for longer, continuing to pump even when prices are depressed — which suppresses the incentive for immediate supply cuts.

Geopolitics and volatility risk: Ongoing geopolitical tensions, conflicts, sanctions, regulatory changes, and uncertainty in major producing regions remain a wildcard — they inject a risk-premium that could prevent prices from collapsing as low as fundamentals alone would suggest.

Shifting energy demand fundamentals: Over the medium-to-long term, energy transition trends (renewables, EVs, efficiency) are gradually reducing oil's share of energy demand growth — which raises structural downside risk for sustained high oil prices.

What Experts Are Saying — Consensus and Divergent Views

Putting together recent analyses and forecasts, here's where the majority of experts currently stand and where opinions diverge.

The majority expect oil prices to soften in 2026, with a base-case Brent average around $60–62 a barrel, reflecting a surplus of supply over demand.

Prominent financial institutions such as Goldman Sachs anticipate a deeper drop — with Brent averaging $56/barrel and U.S. crude WTI around $52/barrel next year.

Some firms — e.g., J.P. Morgan — similarly forecast Brent around $58/barrel for 2026.

On the bearish end - some energy-market forecasters view the surplus and weak demand growth as so significant that prices could slump into the mid-$40s to low-$50s per barrel if corrective supply cuts don’t happen.

On the other side, a smaller set of analysts emphasise the volatility scenario — arguing that geopolitical risk, structural supply constraints (long-term under-investment in some regions), or an unexpected rebound in demand could push prices temporarily back into the $70–$80/barrel zone.

So while there’s no unanimity — the weight of expert opinion tilts toward a softening market — there’s still meaningful uncertainty, and a non-trivial risk of price swings or rebounds.

What This Means for the Real World - Consumers, Governments, Businesses

Depending on which scenario unfolds, 2026 could look quite different for households, companies, and oil-dependent industries worldwide.

Consumers fuel, energy bills, inflation — In the base or bearish scenario, cheaper oil could ease pressure on fuel prices, transport costs, and indirectly on inflation (lower costs for goods/shipping). That might translate into lower petrol/diesel prices, lower heating/fuel costs, and lower inflationary pressure on many commodities.

Oil companies and exporting economies — Prolonged low prices would hit revenues, especially for high-cost producers. Investment could slow, new project development might be delayed, and some smaller producers could become unprofitable. On the other hand, companies with low breakeven costs could remain viable, but profits would tighten.

Governments and fiscal budgets (oil-exporting states, energy policies) — For oil-dependent nations, lower revenues could strain budgets, social spending, or fiscal stability. Conversely, consumer economies might benefit from cheaper energy, but any rebound or volatility would complicate planning.

Energy transition / alternative energy sector — Lower oil prices could slow the economic incentive for switching to renewables or electric vehicles (since fossil-fuel use becomes cheaper). That could slow down decarbonisation efforts or make them more politically fraught. Alternatively — if volatility or spikes return — it could reinforce the case for energy diversification.

Businesses and supply-chain effects — Transport-heavy industries (shipping, logistics, airlines) may benefit from lower input prices; firms that hedge or trade oil will need to navigate increased volatility.

My View: Why the “Base Case” Looks Most Plausible — But We Should Prepare for Surprises

Given the weight of recent data — strong supply growth, modest demand, waning substitution back to high oil consumption — I think the base-case scenario (Brent roughly mid-$50s to low-$60s) is most plausible. It represents a kind of equilibrium: oversupply balanced by opportunistic supply restraint, and a risk-premium that prevents a full collapse.

That said, the number of downside and upside risk-factors is large. We’re in a world of macro-economic uncertainty, geopolitical fragility, and shifting structural demand. Small changes — sanctions, unexpected supply disruptions, inflation, or a rebound in demand — could swing the market significantly.

So if I were advising a business or writing a policy brief, I’d plan for a base-case but include contingency strategies for both: a “cheap oil” environment and a “volatile, spiky oil” world. For long-term investments or fiscal planning, that kind of hedged flexibility seems wise.

Conclusion

2026 is shaping up as a pivotal year for the oil market — a potential turn toward oversupply and lower prices, but with enough uncertainty to leave open swings in either direction. While many forecasts point to a “soft landing” (oil in the mid-$50s / low-$60s), the risk of prolonged oversupply or unexpected shocks means prices could end up significantly lower — or, under certain conditions, spike upward.

For governments, businesses, and consumers alike, that means preparing for a world where oil remains relatively cheap, but with the possibility of volatility. The era of ultra-high, sustained oil price super-cycles may be over (for now). But volatility, political risk, and structural shifts make 2026 a year in which the only real certainty is uncertainty.