The global oil market experienced significant fluctuations in early 2026, primarily driven by supply disruptions and geopolitical tensions. Benchmark crude oil prices soared by $10 per barrel in January, as a series of supply outages tightened physical markets and Iran-US tensions escalated. Despite initial price drops in February due to de-escalation negotiations, the situation took a turn when the US advised ships to avoid Iranian waters in the Strait of Hormuz, causing prices to rebound. ICE Brent futures hovered around $70 per barrel at the time of writing.
Meanwhile, OPEC+ producers confirmed their commitment to maintaining current production quotas through March. This decision suggests a potential increase in global oil supply in the coming months, as output recovers from a sharp decline in January caused by extreme winter weather in North America. Additionally, prolonged disruptions at Kazakhstan's export terminal and a power outage at its largest field have tightened Atlantic Basin light crude markets.
Russian supply also faced a notable decline in January, by 350 thousand barrels per day, as its key customers faced increased pressure from Washington and broader EU sanctions. Indian imports of Russian crude decreased significantly, while Chinese imports surged to an all-time high. Venezuelan crude production dropped by 210 thousand barrels per day in January, but is expected to recover after US authorization for oil exports.
Global oil supply is projected to rise by 2.4 million barrels per day in 2026, with growth evenly distributed between non-OPEC+ and OPEC+ countries, provided the latter maintains its production agreement. However, world oil demand growth for 2026 has been revised downward to 850 thousand barrels per day due to economic uncertainties and higher oil prices, with non-OECD regions accounting for the entire increase. China remains the largest contributor to growth, but at a lower rate compared to its average over the past decade.
As supply continues to outpace demand, global oil inventories rose by 37 million barrels in December, reaching an unprecedented 477 million barrels, or 1.3 million barrels per day, a level not seen since 2020. Chinese crude oil stocks increased by 111 million barrels, while oil on water rose by 248 million barrels, with sanctioned oil accounting for 72% of the increase. US NGL stocks rose by 49 million barrels. Despite this, relatively tight crude inventories in key pricing hubs provide a price floor in a turbulent market facing numerous supply risks.
With global refinery activity declining seasonally from an all-time high in December and oil supply recovering from recent outages, the timing of surplus barrels reaching the Atlantic Basin remains uncertain.
