Oil prices are headed for their largest yearly loss since the onset of the pandemic in 2020 as a wave of global oversupply has significantly depressed prices.
Futures on Brent crude oil (BZ=F), the international pricing benchmark, have shed roughly 17% since the start of year, while US benchmark West Texas Intermediate (WTI) crude (CL=F) has lost a slightly greater 18%.
Between April and December, the Organization of Petroleum Exporting Countries (OPEC) increased monthly production by 2.9 million barrels per day as Saudi Arabia sought to retake market share and price control from the West. In the US, the federal Energy Information Administration expects domestic oil inventories to continue building through 2026 as well, and other exporting countries in the Americas have maintained or raised their own production levels.
The International Energy Agency is now pegging 2026’s oversupply at a level of 3.8 million barrels per day (bpd). Strategists at JPMorgan Chase and Goldman Sachs have set price targets in the $50s per barrel for Brent crude, with a potential for a drop into the $30s or $40s per barrel if OPEC — which has announced a pause in production target changes through the first quarter — does not change course.
Halfway through December, Brent prices slipped below $59, and WTI prices fell below $55 to hit both products’ lowest price since 2021.
At the same time, the amount of oil on the water, sitting in tankers, has ballooned to more than 1 billion barrels’ worth, which does not count toward global supply until the oil is landed.
Of note: 2025’s price action likely would have happened if not for several geopolitical developments that have tightened or threatened to tighten the market.
Continued stagnation in peace talks between Russia and Ukraine prompted the US Treasury Department to place stiff sanctions on Russia’s oil exports, and a blockade of oil tankers moving in or out of Venezuela by the US military has also applied upward pressure on prices.
China, which had largely supported prices throughout the first half of the year by buying far more oil than its domestic needs, is now expanding its production, in a possible signal that Beijing will continue to fill its stores and help to alleviate some of the global overhang.