Oil markets are heading into a period of oversupply, but the bigger risk may lie on the other side of the glut.
Wall Street banks, energy analysts, and the U.S. Energy Information Administration (EIA) broadly agree that global oil inventories are building and will continue to rise into early 2026 — typically the weakest demand period of the year.
Forecasts differ on the size of the surplus, but the consensus view is bearish. Many analysts expect oil prices to average below $60 per barrel in 2026 as excess supply weighs on the market.
The findings were detailed in an Oilprice.com market analysis.
Still, several forecasters believe 2026 could mark the end of the imbalance. Goldman Sachs and others have suggested it may be the last year the market works through a glut before fundamentals tighten again.
Market signals support that view. The oil futures curve remains relatively flat and does not flip into contango until late 2026, indicating traders are not pricing in a prolonged structural oversupply. As Ole Hansen, head of commodity strategy at Saxo Bank, has noted, a soft patch appears likely — but not a repeat of the severe 2020–21 collapse.
Beyond the near-term surplus, a more consequential issue is emerging: the risk of a structural supply deficit later this decade.
Upstream investment has declined in recent years, even as long-term demand expectations rise. In a notable shift, the International Energy Agency (IEA) has acknowledged that new oil and gas development is needed simply to keep production flat, given faster decline rates at existing fields. The agency has also walked back its forecast of peak oil demand by 2030, now expecting demand to reach 113 million barrels per day by 2050 amid rising global energy consumption — including surging power needs from AI technologies and data centers.
Major producers have been warning about this imbalance for years. Saudi Aramco CEO Amin Nasser recently argued that the world is not undergoing an energy transition so much as an “energy addition,” requiring continued investment across all energy sources.
Ironically, the expected glut could worsen longer-term risks. Lower prices tend to defer investment, particularly in U.S. shale. Saxo Bank notes that last year’s U.S. production growth is unlikely to be repeated, with the EIA forecasting flat output in 2026 and potential declines if prices remain below $60.
In short, oil markets face oversupply in the near term — but today’s glut may be laying the groundwork for tomorrow’s shortage.