Most analysts expect oil prices to ease further in 2026 and 2027. But various risk factors ranging from Chinese stockpiling and further conflict in the Middle East to America’s desire for greater influence over Greenland, a settlement of the Russia-Ukraine war and changes to production levels indicate the potential for prices to rise as well as fall.
The US Energy Information Administration notes that the average spot price for Brent crude oil was more than 20% lower in December 2025 than in December 2024 and that prices fell – or were flat – in every month during the second half of 2025 as higher production and increasing oil in floating storage outweighed potential market disruption from tensions in Russia and Venezuela.
It estimates these factors will see average prices fall from $69/barrel in 2025 to $56 in 2026 and $54 in 2027.
Other forecasts suggest a smaller drop in prices. S&P Global Market Intelligence expects oil to remain around $60/barrel this year, observing that the apprehension of Venezuelan President Nicolás Maduro is unlikely to have much impact on pricing since Venezuelan crude production is well below peak levels.
Current Pricing Does Not Reflect Consumption
Chinese stockpiling has created an artificial floor in the market during a period when the Energy Information Administration notes that global oil production growth outpaced consumption growth. According to Erica Downs, senior research scholar at the Center on Global Energy Policy at Columbia University, China’s crude oil imports hit a record high of 11.6 million barrels per day in 2025.
Downs observes that as of early January 2026, China had just over 1.2 billion barrels of oil in storage onshore – which would cover 104 days of net crude oil imports at 2025 levels – as well as hundreds of millions of barrels on tankers or floating storage and in bonded storage in Chinese ports.
Regional Conflicts Have Potential to Impact Supply
This is just one example of how geopolitical developments have the potential to upend any price forecasts. For instance, Brent crude prices are above $71/barrel at the time of writing following US President Donald Trump’s threat of action against Iran if it fails to agree a deal on nuclear weapons.
Warren Patterson, head of commodities strategy at ING describes this as the key uncertainty facing the oil market, with any armed conflict potentially posing a risk to Persian Gulf oil flows through the Strait of Hormuz where around 20 million barrels of crude oil passes every day.
The likelihood of Iran closuring the only sea passage from the Persian Gulf to the open ocean is diminished by the fact that the US imports most of its oil from Canada and Mexico rather than the Middle East, whereas most Iranian oil passes through the strait.
Such action would therefore cause considerable damage to the Iranian economy. However, markets operate on risk and even the suggestion of disruption makes traders nervous.
In the absence of an escalation, Patterson expects bearish fundamentals to take centre stage once again, leading the market to trend lower.
Traders React to Reduced Geopolitical Tension
The impact of reduced geopolitical tension was evident in the fall in oil prices that followed the US President’s more conciliatory comments regarding Greenland and the increased likelihood that threatened tariffs on eight European economies would not be imposed.
Similarly, a long-term peace deal between Ukraine and Russia that led to the removal of sanctions on Russia (the third largest producer of crude oil globally) would exert downward pressure on prices by increasing the volume of oil available.
This possibility is a reminder that investors need to keep a close eye on how much oil is hitting the market. The OPEC+ group of oil producing nations committed to maintaining current production levels during the first quarter of 2026 at its January meeting, reemphasising the pause on planned production increases in February and March first announced in November 2025.
The group did make it clear though that previously announced voluntary production cuts could be reversed or extended.
Market Volatility Creates Trading Opportunities
Prices movements in 2025 underline the volatility of the oil market. With US-Iran tensions adding to existing geopolitical risks there is the potential for even sharper market movements in 2026, creating a favourable market environment for CFD trading where accurate short-term positioning and the ability to react quickly to market events are rewarded.
