- Oil prices rose on hopes U.S.-China trade talks and tariff relief could support global demand.
- ING expects supply growth from OPEC+ unwinding cuts and non-OPEC producers to outpace sub-1 mb/d demand growth through 2026.
- That imbalance points to oil market surpluses in 2025-26 and lower Brent/WTI averages, with EIA also projecting a drop into 2026.
- Key swing factors include weak China demand, OPEC+ compliance, Russia flows, and geopolitical or sanctions-driven disruptions.
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The recent positive momentum in oil prices reflects renewed optimism from U.S.-China trade talks, where both countries have moved to reduce tariffs temporarily, easing concerns about demand destruction especially in export-oriented economies. Oil benchmarks like Brent and WTI have benefited, rising over recent weeks as traders priced in the potential for boosted growth.
However, this sentiment bump comes amid a broader macroeconomic context that points toward continued weakness. Global oil demand growth is expected to remain modest—ING Think forecasts growth of slightly under 1 million barrels per day for 2025, with a similar pace in 2026. Meanwhile, non-OPEC supply is set to rise materially, and OPEC+ is gradually unwinding production cuts, which will contribute additional volumes into an already well-supplied market. These dynamics argue for sustained price pressure.
ING’s outlook suggests that Brent crude could average around $71/bbl in 2025, before dropping significantly in 2026 under weight of growing surplus. The U.S. Energy Information Administration (EIA) similarly forecasts Brent falling toward low $50s per barrel next year. Such price environments are challenging for many producers, especially those operating with higher break-even costs or relying heavily on oil revenues for fiscal balance.
Additional strategic risks are notable: Chinese demand continues to disappoint relative to expectations, especially given structural headwinds from property weakness, slowing industrial output, and accelerating EV penetration. Meanwhile, the trajectory of Russian supply remains opaque, as does the level of OPEC+ compliance with existing cuts. Upside pressure may arise if sanctions tighten, or if supply disruptions emerge.
Synthesizing, the oil market seems caught between short-term upside from easing trade tensions and longer-term downward pressure from oversupply and weak demand. Investors and producers must weigh near-term opportunities against risks of price erosion, especially by late 2025 and into 2026.
Supporting Notes
- Oil prices rose ~2.9% after the U.S. and China agreed to suspend some tariffs and reduce trade tensions during recent Geneva talks. Brent crude was up to ~$65.75/barrel, WTI ~$62.89.
- During talks between U.S. and Chinese officials in London, oil benchmarks rose to multi-week highs (Brent ~$67.19, WTI ~$65.38), supported by hopes that a deal could revive global demand.
- ING forecasts non-OPEC supply growth in 2025 of ~1.4 million barrels per day (mb/d), versus demand growth below ~1 mb/d, leading to a global surplus of roughly 0.5 mb/d despite OPEC+ delaying return of 2.2 mb/d of production.
- EIA forecasts that global oil supply growth will exceed demand growth in both 2025 and 2026; expects Brent average prices to drop from ~$69 in 2025 to ~$52 in 2026.
- ING projects a surplus of more than 2 mb/d in 2026, with supply growth of around 2.1 mb/d and demand rising by only ~0.8 mb/d; the average price for Brent forecasted at ~$57/bbl.
- Banks surveyed (via Haynes Boone) have cut near-term oil price forecasts for 2026 from ~$57.01 to ~$55.44 per barrel; natural gas prices also adjusted downward.
- The IEA warns of a potential daily surplus of 3.8 million barrels in 2026 due to productions by OPEC+ and China’s stockpiling even as demand softens.
- Weakness in China: crude oil imports down ~5.7% month-on-month (MoM) in May; refined product exports down ~15.9% year-on-year (YoY); exports quotas for refined products down ~4%.