Bearish Oil Forecast, But Significant Upside Scenarios Possible

The bearish outlook for oil intensifies, largely driven by ING's projection of a growing global surplus. Their analysis anticipates a surplus exceeding 2 million barrels per day by 2026, pressuring Brent crude prices towards $57 per barrel. This supply glut stems significantly from OPEC+ rapidly unwinding its support, specifically phasing out 2.2 million barrels per day in voluntary cuts initiated earlier this year according to OPEC+ reports.

A concrete step in this unwinding process occurred in September 2025, when OPEC+ members executed a 547,000 barrels per day production hike. This move accelerates the return of supply that had been withheld since April's cut implementation. Compounding the pressure, resilient non-OPEC production continues to climb despite already weak price levels, further swelling the surplus.

While OPEC+ retains flexibility to pause or reverse increases if needed, citing steady global demand and low inventories as reasons for the recent hike, the primary focus remains on defending market share. This strategy prioritizes volume over price, fueling the surplus dynamics. Geopolitical tensions, particularly those potentially eased by Russian peace talks, present some upside risk by tightening supply, but the base case remains bearish due to the sheer scale of cuts being reversed and persistent non-OPEC output.

Critical Risks & Scenario Break Points

The current oil market faces significant headwinds that could undermine the growth thesis. Foremost is the risk of a sharper global demand slowdown than currently priced in. If a worldwide recession materializes, it would severely dent consumption, likely pushing prices below the $57 Brent average projected by ING through 2026 as the surplus swells beyond 2 million b/d. This demand collapse scenario would be exacerbated by a rapid unwinding of OPEC+ supply cuts and rising non-OPEC production, creating a classic supply glut.

A critical risk to OPEC+ discipline lies in the implementation of its new capacity assessment mechanism. While the group approved an annual process to evaluate member production ceilings starting in 2027, this introduces potential for future quota disputes. Sanctioned members like Russia and Iran, facing alternative assessment methods, might struggle to meet new targets or resist agreed-upon cuts, creating friction and undermining collective action. The effectiveness of this new framework remains unproven and could become a source of conflict if members disagree on their maximum sustainable capacities.

Furthermore, geopolitical events could disrupt the current fragile balance. While ING notes that easing sanctions via a Russia-Ukraine peace deal could increase supply and pressure prices lower, the opposite scenario – stricter enforcement of existing sanctions on Russian oil – could paradoxically tighten the market in the near term, increasing volatility. This volatility, coupled with dwindling spare capacity, creates a volatile environment where miscalculations or disputes over the new capacity rules could trigger significant price swings, making the market more susceptible to abrupt shifts.

OPEC+ has shown some ability to adapt, pausing output increases in early 2025 amid weak demand and uncertainty. However, the group's own expectation of a balanced market contrasts sharply with the IEA's forecast of substantial surpluses (2.4 million b/d in 2025, 4.1 million b/d in 2026), highlighting deep disagreements that could lead to premature or reactive policy shifts if fundamentals deteriorate faster than anticipated. The next policy review in January 2026 will be a crucial test of their ability to manage these accumulating risks without fragmenting further.

Oil Market Wildcards: Supply Constraints vs. Expansion Plans

Brent crude faces headwinds, with ING projecting an average of $57 per barrel through 2026 as a growing global surplus exceeds 2 million barrels per day (b/d) from OPEC+ cuts unwinding and rising non-OPEC output according to ING analysis. However, two major geopolitical and strategic factors could disrupt this bearish baseline. First, the effectiveness of sanctions targeting Russian oil flows remains a potent upside wildcard. If these measures successfully restrict the export of stranded crude currently accumulating at sea, global supply could tighten unexpectedly, creating price pressure. Enforcement challenges and the potential for eased sanctions following peace talks, however, keep this scenario uncertain.

Separately, OPEC+'s announced capacity expansions present a different kind of strategic shift. Major producers are actively planning for significantly higher future output: the UAE targeting 5 million b/d, Iraq aiming for 6–7 million b/d, and Saudi Arabia preparing for 12 million b/d by 2027 according to oil price reports. Crucially, these increases aren't just for future growth; they are being built as strategic spare capacity. This buffer allows OPEC+ to respond defensively to market shocks or geopolitical events by quickly flooding the market, potentially dampening price spikes if deployed. The group is actively reassessing each member's maximum sustainable production capacity to set these 2027 baselines, aiming for greater technical fairness.

The net effect hinges on implementation and demand. While spare capacity gives OPEC+ defensive tools, the sheer scale of planned increases carries the risk of creating oversupply if global demand growth falters or U.S. shale production rebounds stronger than expected. Furthermore, the actual deployment of this capacity, especially Saudi Arabia's vast buffer, depends heavily on perceived market threats. If sanctions unexpectedly majorly disrupt Russian supply, OPEC+ might hold back its new capacity to avoid flooding the market and crashing prices, potentially supporting prices in the short term. Conversely, if sanctions prove ineffective, the expanding OPEC+ capacity provides a powerful force to suppress prices. The outcome remains fluid, dependent on the interplay of geopolitics and global demand dynamics.

Investment Implications

The current bearish oil pricing, with Brent forecast near $57 per barrel, presents potential entry points for investors betting on either tighter supplies from effective sanctions or OPEC+ managing excessive production returns. However, this opportunity exists within a highly volatile environment requiring disciplined risk controls, particularly around unexpected demand deterioration or sharp geopolitical shifts.

OPEC+ production flexibility remains key. Their announced 547,000 bpd increase in September 2025 is part of a larger plan to unwind 2.2 million bpd of voluntary cuts, a move directly contributing to the growing global surplus exceeding 2 million bpd that fuels the bearish outlook. This deliberate unwinding aims to compensate for earlier overproduction and stabilize prices, but the pace and outcome depend heavily on near-term demand signals and the group's monthly conformity reviews. Investors should watch Q4 2025 demand data closely, as weak inventory drawdowns could trigger a reassessment of OPEC+ plans and extend the surplus period. Conversely, if sanctions on Russian oil prove more effective than anticipated, they could materially reduce global supply and shrink the surplus, providing a significant upside catalyst.

Despite the near-term bearish pressure, long-term investment logic remains intact for those focused on fundamental market rebalancing. The group's stated flexibility to pause or reverse production adjustments signals they retain tools to manage severe imbalances. Look at penetration rate first: The ongoing unwinding of cuts represents a high penetration of existing spare capacity into the market. Look at learning curve first: OPEC+ is demonstrating a learning curve in responding to weaker demand signals by pausing further increases in early 2026 if the surplus persists. The critical near-term catalysts are the next monthly conformity reports and developments in Russian sanctions; these will determine whether the current surplus narrows quickly or endures, directly impacting short-term price direction and the efficacy of any entry point strategy.