The current solidity of the oil market masks a growing state of complacency and overconfidence, warned senior oil industry officials at an international energy forum in London.
Despite ongoing conflicts and changing supply patterns, Brent seems to have found support near $60/bbl. However, participants noted that weak geopolitical risk pricing, increased supply from OPEC and non-OPEC countries, and slowing Chinese fuel demand could lead to further price declines going forward.
Market durability
Forecasts have pointed to a potential oil supply surplus, yet inventories remain at low levels and physical markets are tight. This resilience is attributed to political factors, precautionary storage behaviors and structural supply shortages in some regions.
A number of speakers emphasized that the market is gradually tilting to the weaker side and that prices are trending lower, warning that any imbalance in the market could quickly be reflected in prices. They predicted that prices would fall to the mid-50s range during the winter, before stabilizing again between $62 and $66 per barrel in the second half of 2026.
U.S. shale oil
It was noted that the US shale sector will be a pivotal factor in determining the direction of the market, as the profitability of production declines when prices fall below $60/bbl, prompting companies to reconsider drilling and expansion plans. It has also been suggested that lower prices could gradually lead to a 200-300,000 bpd decline in US production in 2026, with the full impact being delayed due to the nature of operating cycles.
Influence of China
China's strategic reserves played an important role in stabilizing the market in 2025 by absorbing large volumes of crude, despite the lack of transparency about the size of these stocks. However, China's demand prospects appear limited, as gasoline and diesel consumption has peaked, while the petrochemical sector suffers from poor economic viability due to the supply glut.
China's rapid electrification continues with the development of battery technologies and the adoption of electric vehicles, reducing demand growth for traditional fuels. While jet fuel remains a partial growth point, it is estimated that China will not be the main driver of global demand going forward.
Poor risk pricing
Participants agreed that markets have become desensitized to geopolitical risks, with regional conflicts and attacks on production facilities being treated as if they were settled or stable. A number of speakers warned that this excessive complacency could lead to extreme volatility in the event of any new supply disruptions.
Slow energy transfer
Speakers noted that global trading companies have scaled back their investments in large-scale renewable energy projects due to poor returns and unclear government policies, and are now focusing on biofuels and carbon capture and trading, where they have an advantage in logistical expertise and risk management.
Experts believe that electrification is the most sustainable path, and will open up new opportunities in electricity trading as the need to balance the grid grows in the face of erratic renewable energy sources.
Participants agreed that 2024 and 2025 was a period of intense work for lower returns, as margins declined and it was difficult to capitalize on price fluctuations, but portfolio diversification between oil and gas, electricity and metals helped mitigate risk and maintain a measure of stability.
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