DonateOil prices falling on record low
Global oil markets are heading into a period of significant surplus, with Goldman Sachs and other major analysts forecasting Brent crude prices to fall to the low $50s per barrel by late 2026 due to exceptional supply growth and sluggish demand. This dynamic is expected to reshape the energy security landscape, offering both benefits and risks for global stability.
Oil Surplus: Drivers and Scale
The forecasted oil glut is driven by rapid output increases, particularly from non-OPEC countries such as the United States, Brazil, Canada, Guyana, and Norway. While OPEC+ recently voted to unwind their voluntary production cuts, the resulting supply additions have not been matched by global demand, which remains weak amid economic headwinds and more modest consumption growth in China, India, and Brazil. The International Energy Agency (IEA) sees global supply rising by 2.5 million barrels per day in 2025, while demand may increase by only 680,000 barrels per day—marking the weakest uptick since 2019.
Inventory Build-Up and Pricing Pressure
This imbalance is leading to extensive inventory buildup, especially in OECD countries, which are projected to add hundreds of millions of barrels to storage by 2026. As easily accessible storage fills up, producers may be forced to use more expensive alternatives or even curtail production, adding further downward pressure on prices[6]. Goldman Sachs expects Brent crude prices to average $56 in 2026—well below current and historical norms—unless major disruptive events change the picture.
Geopolitical and Security Implications
While low oil prices typically benefit importers and help restrain global inflation, a sustained surplus and price drop have complex implications for energy security: Many oil-dependent economies, especially in the Middle East, Africa, and Latin America, may face fiscal shortfalls, increasing the risk of internal unrest, reduced social spending, and political volatility. This could heighten regional tensions or disrupt supplies in the event of government crises. The build-up of inventories, especially in OECD and possibly in China (if reserve-building is accelerated), provides a greater buffer against temporary supply shocks such as wars or natural disasters. However, if key producers cut investment or shutter production, medium-term supply could become more fragile once the surplus is absorbed. And nevertheless, geopolitical risks remain prominent. Sanctions on Russia and Iran, ongoing conflicts in the Middle East, or the threat of strategic shipping lanes being blockaded (e.g., Bab el-Mandeb Strait) could quickly tighten the market and send prices higher. Goldman Sachs notes that major supply disruptions could reverse price trends abruptly. And all this will lead into more transition of the energy markets. Lower oil prices may slow down investments in renewable energy and energy efficiency in some regions, as cheap fossil fuels become more attractive, potentially delaying decarbonization efforts. However, sustained volatility could also drive policymakers to accelerate the transition to renewables for greater energy independence.
Outlook for Energy Security
The coming oil surplus offers near-term security in terms of abundant supply and low prices for consumers and importing nations. Yet, it also introduces risks of underinvestment, financial instability in producing states, and increased market uncertainty due to geopolitical shocks. The ultimate impact on global energy security will depend on how producers, consumers, and governments respond—balancing strategic reserves, investment in sustainable energy, and diplomatic efforts to manage market shocks.
