Yearly Quote on Crude Oil - Recap 2025 and Outlook 2026 by Mr Navneet Damani, Motilal Oswal Financial Services Ltd
Below the Yearly Quote on Crude Oil - Recap 2025 and Outlook 2026 by Mr Navneet Damani, Head of Research, Commodities, Motilal Oswal Financial Services Ltd
* Rising supply concerns, a fading geopolitical risk premium, a weak demand outlook, and persistent economic uncertainty kept crude prices under pressure in 2025, posting negative returns of -17%
* Crude oil opened the year with bullish positioning built on OPEC+ discipline, on winter demand and US sanctions on Russia & Iran
* Despite sanctions, Russian exports largely continued via non-shadow tankers, limiting immediate supply disruptions amid growing economic uncertainty
* While Non-OPEC supply growth kept adding barrels, the growing trade friction reflecting US sanctions & concerns of an economic slowdown weighed on prices
* OPEC+ shifted strategy in the early half of 2025, accelerating the return of earlier cuts and signalling a move from price defence to market-share protection.
* From April to December, OPEC+ returned supply aggressively, starting with +138 kb/d in April, accelerating to over 400 kb/d per month mid-year, peaking near 550 kb/d in August–September, and tapering to steady +137 kb/d additions toward year-end, bringing cumulative increases to nearly 2.9 mb/d.
* Sanctioned barrels from Russia, Iran and Venezuela continued flowing, increasing the stored oil-on-water and blunting disruption fears.
* Floating storage also grew as increasing worries of secondary tariff moved buyers of Russian Crude towards alternate sources. This lead to increase in Oil-on-water storage of sanctioned barrels.
* Inventories built steadily through the year, with product stocks rising faster than crude inventories off late.
* Demand underperformed expectations, not collapsing but failing to absorb new supply.
* China’s strong imports masked weak consumption, as crude was diverted into strategic and commercial storage.
* Along with the growing EV penetration, manufacturing PMIs remained fragile globally, repeatedly pressuring demand outlooks
* Supply disruptions (Libya, Nigeria, wildfires, maintenance) created only brief price spikes that faded quickly.
* Geopolitical events drove volatility, not direction, as demand remained missing; however, oversupply concerns remains in the backdrop.
* Ukraine-Russia Peace-talk headlines periodically erased risk premium, accelerating sell-offs; however, the wait for a concrete deal seems never ending.
* Ultimately, discounted sanctioned barrels kept supply flowing, just as economic uncertainty eroded demand confidence. With supply rising and demand unable to respond, leaving crude prices under sustained pressure.
Crude Oil 2026 Outlook :
* Supply, not demand, is the dominant driver heading into 2026. Demand is growing, but not fast enough to absorb the excess barrels already in the system
* Prices are biased lower on average in 2026 versus 2025 (). This reflects persistent oversupply and elevated inventories, not a collapse in demand
* OPEC+ has shifted from price defence to protecting market share. The aggressive return of supply in 2025 has weakened its pricing authority with spare capacity limited
* Non-OPEC supply remains structurally high, as even flat production at near-record levels, particularly in the U.S., is sufficient to keep balances loose
* China no longer acts as the swing consumer, as Imports are increasingly going into storage rather than end-use consumption, reducing demand responsiveness
* Geopolitical risks now drive volatility, not direction. Price spikes fade quickly in a well-supplied market unless disruptions are severe and sustained
* The key question for 2026 is how low prices must fall to force supply to respond. Until production is curtailed, downside pressure persists
* Downside risks for prices remains open if supply discipline weakens or demand underperforms. Stabilisation or an uptick would require visible supply destruction, stronger demand, or decisive OPEC+ cuts
* Prices could continue to trade in a broad range unless there is significant rise in the overall risk premium, provide a boost in prices.
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