Oil Hits Pandemic Lows As Analysts Insist Global Supply Will Far Outstrip Demand In 2026

WTI has achieved the worst performance since 2018: File Image/Pixabay

A key benchmark on Tuesday plummeted to its lowest close since the height of the Covid pandemic as prospects for peace between Russia and Ukraine seemed to remain positive and analysts braced for what they are convinced will be a New Year of steady oversupply.

West Texas Intermediate settled down $1.55 at $55.27 per barrel, the lowest since February 2021, and Brent settled down $1.64 at $58.92 per barrel.

WTI has achieved the worst performance since 2018 by losing about 23 percent this year, and Brent has experienced the worst year since 2020 with a fall of about 21 percent.

While a lowering of geopolitical tensions as the peace talks between Russia and Ukraine continue, pundits including Jorge Leon, head of geopolitical analysis at Rystad Energy, pointed out to clients in a note that Russian oil stored on water is currently estimated at around 170 million barrels, and a peace agreement would likely mean a "sizeable volume" of it would return to the market as sanctions against Russia are lifted.

As for the global supply market, JPMorgan strategists stated, "At the risk of flogging a very dead horse, our message to the market has remained consistent since June 2023: while demand is robust, supply is simply too abundant."

Macquarie oil analysts agreed, noting that the commodity's downward trajectory has exceeded even their projections: "Our near-term balances now appear even more bearish than what we had previously characterized as 'cartoonishly' oversupplied."

Two bullish signs – possible flows from Venezuela dropping off due to the U.S.'s scrutiny of the Central American country, and the latest rate cut promised by the U.S. Federal Reserve – wouldn't be enough to reverse oil's fortunes, said Claudio Galimberti, chief economist and global director of market analysis at Rystad Energy.

"For energy commodities specifically, fundamentals remain the anchor," he explained.

Even gloomier was a respondent to the latest Dallas Fed quarterly survey who said, "[Washington] is pushing for $40 per barrel crude oil, and with tariffs on foreign tubular goods, [input] prices are up, and drilling is going to disappear."

"The oil industry is once again going to lose valuable employees."

In other news on Tuesday that normally would influence trading but is debatable given the overwhelmingly negative outlook on oil, the American Petroleum Institute estimated that U.S. crude inventories saw a massive draw of 9.3 million barrels in the week ending December 12.

And while gasoline inventories the week prior grew by 7 million barrels, the latest figures show a gain of 4.8 million barrels.