A global oil glut is sending oil prices lower, and oil stocks with them.
If your portfolio is energy-heavy right now, or if you’re thinking about putting additional funds into energy stocks, you may want to reconsider.
Because there’s one very important reason to avoid holding or buying energy stocks going into the new year: a growing global oil glut.
There are currently 1.4 billion barrels of oil on the water — i.e., oil being shipped to a port or stored and waiting for a buyer. That’s 24% more than the average for this time of year from 2016-2024.
As you might imagine, that glut has pushed oil prices down in a big way. West Texas Intermediate, the type of oil extracted from oilfields in the U.S., is currently trading at about $57 a barrel, $15 below where it started the year. Brent, the benchmark for oil from Europe, Africa, and the Middle East, is now priced at about $60 a barrel, also $15 below where it was at the beginning of 2025.
And as a result, the average price of a gallon of gasoline in the U.S. has fallen below $2.90, the lowest it’s been since the COVID-19 pandemic kept everyone at home.
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Falling oil prices are having an impact on share prices
Falling oil and gasoline prices have begun to push energy stocks lower. The share price of oil giant Chevron (CVX +1.39%) has been sliding since the beginning of September and is now down 9% since that recent peak.
Today’s Change
(1.39%) $2.05
Current Price
$149.80
Key Data Points
Market Cap
$297B
Day’s Range
$148.69 – $150.49
52wk Range
$132.04 – $168.96
Volume
8.1M
Avg Vol
7.9M
Gross Margin
13.60%
Dividend Yield
4.63%
ExxonMobil (XOM +1.25%) has held up a bit better, though it’s been trending lower over the past month. ConocoPhillips (COP +1.49%) is off about 9% since a recent peak in early September.
ExxonMobil
Today’s Change
(1.25%) $1.46
Current Price
$118.15
Key Data Points
Market Cap
$492B
Day’s Range
$117.33 – $118.46
52wk Range
$97.80 – $120.81
Volume
12M
Avg Vol
15M
Gross Margin
22.11%
Dividend Yield
3.43%
Occidental Petroleum (OXY +1.64%) is off 20% for the year and Marathon Petroleum (MPC 2.11%) is off 16% over the past month.
Occidental Petroleum
Today’s Change
(1.64%) $0.65
Current Price
$40.27
Key Data Points
Market Cap
$39B
Day’s Range
$39.83 – $40.47
52wk Range
$34.78 – $53.20
Volume
10M
Avg Vol
10M
Gross Margin
33.46%
Dividend Yield
2.42%
Basically, most stocks in the energy sector have been moving sideways or south in recent months. And it could get a lot worse in 2026 if the global glut continues or worsens.
Oil sector analysts expect it to do just that. Nearly all of the world’s largest oil traders expect a state of oil oversupply in 2026. The International Energy Agency forecasts that global oil supplies will outpace demand by more than 3.8 million barrels a day next year, which would be a record mismatch between supply and demand for petroleum.
And the U.S. Energy Information Administration’s latest outlook says rising inventories in 2026 will put downward pressure on oil prices in coming months, with Brent oil falling to $55 in the first quarter and remaining there through the end of the year.
Image source: Getty Images.
Big oil companies are paring workforces
It seems that the biggest producers of oil are now bracing for it. In September Exxon announced 2,000 job cuts as part of a restructuring plan. ConocoPhillips, Chevron, and more than a dozen other energy companies have announced or are already proceeding with layoffs.
Other factors could push oil prices lower or even higher
To be sure, the price of oil and the profitability of oil companies are not wholly dependent on supply and demand. They’re also impacted by geopolitical events. Growing hostilities between the West and Russia could send prices higher again on concerns about supply, while a ceasefire or end to the Russia-Ukraine war would alleviate such concerns and send prices even lower by ending sanctions on Russian oil. Similar scenarios in the growing U.S.-Venezuela confrontation could have similar price impacts. Such developments are difficult to predict.
And lower oil prices are good for economic growth everywhere — except in countries that are highly dependent on oil exports. They’re also not good for oil companies and their shareholders.
And of course, there’s the somewhat accurate observation that the cure for low oil prices is low prices. That is, lower oil prices force some producers to shut down projects, reduce investments in new sources, or even go out of business. That decreases the supply of oil. At the same time, lower oil prices increase the demand for oil and oil products like gasoline, because people use them more when they’re cheaper.
But those scenarios take a while to play out. In the meantime, oil stocks don’t look promising.