Oil prices have hit five-month lows, with analysts doubting a rebound to $65 per barrel unless global demand improves. Despite tighter sanctions on Russian crude, oversupply and weak consumption continue to pressure the market. WTI trades near $58 and Brent around $62, as rising inventories and slower growth weigh on prices.
Key takeaways
• WTI trades near $58.00–$59.00 and Brent at $62.00, both at five-month lows.
• India’s pledge to halt Russian crude imports and U.S. pressure on China may tighten supply marginally.
• The U.K. sanctions new Russian oil assets and tankers, adding friction to global trade.
• OPEC+ output is rising as members unwind cuts, while U.S. shale continues record production.
Political pressure meets market inertia
After weeks of steady declines, oil prices saw a short-lived rebound in early Asian trading, supported by fresh geopolitical headlines. U.S. President Donald Trump announced that Indian Prime Minister Narendra Modi had agreed to halt Russian oil imports, marking a symbolic win in Washington’s campaign to curb Moscow’s energy revenues. Trump added that he would next seek to pressure China to reduce its imports – a move that, if successful, could restrict the flow of discounted Russian crude that has cushioned global supply.
The U.K. imposed new sanctions on Russia’s top oil producers, Lukoil and Rosneft, along with 44 tankers accused of bypassing G7 price caps. The measures, which include asset freezes and service restrictions, aim to tighten Russia’s oil trade. However, market reaction has been limited as traders focus on signs of oversupply. U.S. data shows crude inventories rose by 7.36 million barrels and gasoline by nearly 3 million, while distillate stocks fell 4.79 million — suggesting steady fuel use but persistent overall surplus.
OPEC+ production increases are overwhelming the market
The International Energy Agency (IEA) revised its 2025 and 2026 oil supply forecasts higher, reflecting a faster unwinding of OPEC+ production cuts and robust growth from non-OPEC producers. Global supply is now expected to grow by 3 million bpd in 2025 and 2.4 million bpd in 2026, driven by two key forces:
- OPEC+ expansion: Saudi Arabia, Iraq, and the UAE have boosted output, collectively adding close to 400,000 barrels per day since September as they unwind earlier cuts.
- Non-OPEC surge: The United States, Brazil, Canada, and Guyana continue to scale production, with U.S. output at a record 13.58 million bpd. This record level has been achieved despite a significant reduction in active rigs, thanks to shale efficiency gains, longer laterals, and the completion of drilled-but-uncompleted (DUC) wells.
This aggressive production pace is pushing the market toward what the IEA calls a “persistent surplus.” Global inventories climbed to 7.9 billion barrels in August – the highest since 2021 – and the volume of “oil on water” surged by 102 million barrels in September as exports from the Middle East and the Americas grew.
Geopolitical factors could slow the fall
Geopolitical factors could lend temporary support to oil prices, with sanctions on Russia and Iran limiting exports and China’s crude stockpiling helping absorb excess supply. The Trump administration’s push for Asian nations to cut Russian imports may further tighten the market if implemented. Still, traders remain cautious, awaiting concrete signs of reduced supply. Bank of America forecasts short-term volatility but maintains a bearish outlook, projecting Brent could fall below $50 if China’s demand weakens or U.S.–China trade tensions intensify.
Low-cost producers and U.S. shale operators are positioned to withstand lower prices thanks to efficiency gains, while offshore and high-cost projects may face margin compression. Refining companies could remain relatively insulated, benefiting from cheaper feedstock and strong throughput volumes, even in a lower price environment.
Disclaimer: The performance figures quoted are not a guarantee of future performance.
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