A great bearish week last week for the world’s oil consumers. Brent fell 4.1% and closed the week at $61.12/b and not too far from the low of the week at $60.77/b. Continued Russia/Ukraine peace negotiations helped to keep a bearish tone in the market. Renewed bearish outlook for 2026 by the IEA which basically stated that if OPEC want a balanced market in2026 they’ll need to cut production by 3.5 mb/d from current level. On 10 December the U.S. Treasury’s Office of Foreign Assets Control issued an extension to 17. January of the deadline for compliance to the sanctions connected to Rosneft and Lukoil. The US essentially do not want any disruption to the flow of oil out of Russia. Further extensions again and again is likely with no real disruption to the flow of oil to markets. Except some friction.

The Brent 2026 is trading at $60.7/b at the moment. A great price for the consumers of the world. But not a lot of buying interest it seems. Though we do know that most of our consuming clients just love this price level. Thus on a general basis they’ll buy at this price any day. But outlooks for 2026 oil are of course very bearish (Ref IEA last week) and the general economic and political outlook for 2026 is a real headscratcher for most. So many consumers naturally sit back carefully waiting.

Brent 2026 at $60.7/b is only $40.0/b in 2008 dollar! But to get a sense of how cheap $60.7/b for Brent 2026 really is it is good to take a look at it in 2008-dollar for which the price is no more than $40/b! Of course the price is what it is and 2008 is a long time ago. But still we can’t help being amazed over how cheap it is. Due to incredible, continuous oil productivity since then of course as we wrote about in a recent note. To the joy for consumers and to the despair for OPEC.

Cheap oil and gas is a great vitamin injection for the world economy in 2026. But another aspect of cheap oil in 2026 is of course how incredibly positive it is for the global economy. This is juice and vitamins in bundles! Add in natural gas in the global LNG market which for 2026 is trading at only $53/boe! Down from around $72/boe on average in 2025 (and more than $200/boe in 2022). It will be the lowest cost level for natural gas for global LNG importers since 2021! Add in lower US interest rates and a yet softer USD as Trump gets control of the new Fed chair. This is all juice and steroids for the global economy. If the world also can start to reap productivity rewards from the utilization of AI then that is another positive. So solid economic growth and with it solid demand growth for oil and gas most likely.

Huge surplus in 2026? China will horde and OPEC+ will adjust. And what about the 3.5 mb/d which OPEC will have to cut to balance the market in 2026 according to the IEA? Well, China will likely continue to buy a lot of oil for strategic stock building as huge oil imports is one of its weakest geopolitical points. Building strategic reserves is also a good alternative to FX reserves now that US treasuries are not so much in favor by China and EM central banks. China has to buy something for its $1trn trade surplus and oil for strategic reserves is a natural and easy choice. And, OPEC(+) will cut a bit as well.

OPEC+ has already taken a half-turn as it has shifted from monthly increases to ”no change” in Q1-26. The next message will likely be ”cut”. One should possibly by oil forward before such a message hits the headlines. But of course, if OPEC+ sits back and closes its eyes and do no changes to its production, then the oil price will likely totally crash. We do however think that the group’s eyes are wide open.

OPEC production in mb/d versus IEA’s call-on-OPEC for 2026. To get a balanced market in 2026 the group needs to cut 3.5 mb/d from current level. But the group needs money too and not just market share.

Brent fell 2% yesterday to $62.49/b and is trading slightly lower this morning at $62.4/b. It is being pushed  towards the 60-line by the booming amount of oil at sea. Oil at sea has increased by 2.5 million barrels every day since mid August and it keeps on moving higher. Last week it increased by 2.0 mb/d and stands at 1398 mb and the highest since Vortexa data in Bloomberg started in 2016. Higher than the previous peak in May 2020 when both Russia and Saudi Arabia had opened their taps on full throttle during that spring while global demand collapsed due to Covid-19.

The only reason why Brent crude hasn’t fallen faster and deeper is because of the US sanctions related to Rosneft and Lukoil which were announced on 22 October. Brent touched down to the 60-line only two days ahead of that announcement with almost all front-end backwardation in the Brent curve gone on 20 October. These new sanctions didn’t prevent Russian oil from coming onto water, but it added a lot of friction to the offtake of Russian crude oil. Brent crude bounced to $66.78/b just a few days after the sanctions were announced and the front-end backwardation strengthened again. Lots of oil at sea, and rising, but much of it hard to touch as they were Russian barrels.

But these sanctions are predominantly just friction. Russian crude keeps flowing into the global market and from there it gradually merges into the general stream of oil in the global market with ship to ship transferers and blending in pools of other oil. Frictions and delays, but it keeps flowing.

The global market has implicitly been running a surplus of 2.5 mb/d since mid-August. The easy read of the oil at sea from Vortexa is that the global oil market has been running a surplus of some 2.5 mb/d since mid-August and that the market keeps running a surplus of such magnitude.

The blob of oil at sea will eventually come on shore. Eventually the current huge blob of oil at sea will move onshore where the sensation of rising crude oil stocks will be more tangible and explicit.

Yet higher stock build in Q1 as global demand falls by 1.5 mb/d. Global demand in Q4 is usually weaker than in Q3 and Q1 demand is usually significantly weaker than Q4. Thus the rate of increase in oil at sea or oil in onshore stocks will likely be an even stronger force as we move into Q1-26 when global demand is about 1.5 mb/d lower than in Q4-25.

First price tumbles. The OPEC+ steps in with cuts. The rapid rise in crude stocks at sea or onshore is set to continue until OPEC+ says ”STOP”. The order of events is: a) The price tumbles into the low 50ies and then b) OPEC+ steps in with fresh cuts. Typically in that sequence.

And yes, we do expect OPEC+ to make adjustments and cutbacks in production when the Brent crude oil price tumbles to the low 50ies.

Crude oil at sea shooting higher at an average rate of 2.5 mb/d since mid-August and 2.0 mb/d last week. Increasingly pushing Brent crude lower but with friction and delay as much of the oil at sea is Russian or Iranian oil with sanctions attached. 

Brent crude fell 3.8% yesterday to $62.71/b. With that Brent has eradicated most of the gains it got when the US announced sanctions related to oil sales by Rosneft and Lukeoil on 22 October.  Just before that it traded around $61/b and briefly touched $60.07/b. The US sanctions then distorted the reality of a global market in surplus. But reality has now reemerged. We never held much belief that 1) The sanctions would prevent Russian oil from flowing to the market via the dark fleet and diverse ship to ship transferee. Russia and the world has after all perfected this art since 2022. Extra friction in oil to market, yes, but no real hinderance. And 2) That Trump/US would really enforce these sanctions which won’t really kick in before 21 November. And post that date they will likely be rolled forward or discarded. So now we are almost back to where we were pre the US sanctions announcement. 

OPEC revising (and admitting) that the global oil market was running a surplus of 0.5 mb/d in Q3-25 probably helped to drive Brent crude lower yesterday. The group has steadfastly promoted a view of very strong demand while IEA and EIA have estimated supply/demand surpluses. Given OPEC’s heavy role in the physical global oil market the group has gotten the benefit of the doubt of the market. I.e. the group probably knows what it is talking about given its massive physical presence in the global oil market. The global oil market has also gotten increasingly less transparent over the past years as non-OECD increasingly holds the dominant share of global consumption. And visibility there is low.

US EIA report: US liquids production keeps growing by 243 kb/d YoY  in 2026. Brent = $55/b in 2026. The monthly energy report from the US energy department was neither a joy for oil prices yesterday. It estimated that total US hydrocarbon liquids production would grow by 243 kb/d YoY to 2026 to a total of 23.8 mb/d. It has upped its 2026 forecast from 23.4 mb/d in September to 23.6 mb/d in October and now 23.8 mb/d. For now prices are ticking lower while US EIA liquids production estimates keeps ticking higher. EIA expects Brent to average $55/b in 2026.

IEA OMR today. Call-on-OPEC 2026 at only 25.4 mb/d. I.e. OPEC needs to cut production by 3.7 mb/d if it wants to balance the market. The IEA estimated in its Monthly Oil Market Report that a balanced oil market in 2026 would require OPEC to produce only 25.4 mb/d. That is 3.7 mb/d less than the group’s production of 29.1 mb/d in October.

OPEC+ now has to make some hard choices. Will it choose market share or will it choose price? Since August there has been no further decline in US shale oil drilling rig count. It has instead ticked up 4 to now 414 rigs. A lower oil price is thus needed to drive US production lower and  make room for OPEC+. Down in the 50ies we need to go for that to happen. We think that first into the 50ies. Then lower US oil rig count. Then lastly OPEC+ action to stabilize the market.