Oil Market Report - February 2026

February 2026 on the oil market has looked less like a clean extension of January’s rally and more like a high-beta consolidation in which the front month crude futures repeatedly repriced the probability of a U.S.–Iran supply shock.

EXECUTIVE SUMMARY

February 2026 on the oil market has looked less like a clean extension of January’s rally and more like a high-beta consolidation in which the front month crude futures repeatedly repriced the probability of a U.S.–Iran supply shock. Both ICE Brent and NYMEX WTI contracts have held above late-January levels overall, but the path has been dominated by abrupt risk-premium expansions and compressions as diplomacy headlines alternated with incidents around the Strait of Hormuz. In this regime, fundamental prints—especially U.S. inventories—mattered mainly when geopolitical tension briefly eased and the market was willing to re-anchor to balance-sheet logic. As of the morning of February 27, Brent was higher by $2.24/bbl to $71.56/bbl, recording an advance of roughly 3.2% relative to the January close level, while WTI was up $0.75/bbl to $65.96/bbl, providing a gain of about 1.2%. February’s crude performance is best described as two regimes stitched together. The first half (February 2–17) was a volatile range defined by repeated risk-premium expansion and compression, with Brent largely oscillating between the mid-$66s and high-$69s and WTI between the low-$62s and mid-$65s. The second half (February 18 onward) re-rated the crude complex higher, pushed Brent sustainably into a $70–$72 band and WTI into roughly $65–$67.The month’s intraday extremes underscore how violently the crude market has oscillated around the diplomacy/war binary: Brent’s low of the month was $65.19/bbl on February 3 and its high was $72.36/bbl on February 26; WTI’s low was $61.12/bbl also on February 3 and its high $67.28/bbl on February 23.

March 2026 opens with Brent and WTI carrying an elevated Middle East “insurance” premium after February’s swings, but fundamentals are likely to turn more two-sided as refinery maintenance bites and some early-year outages unwind. The IEA has highlighted that maintenance has already started to pull global refinery crude throughputs down from late-2025 highs, and this should remain a demand-side headwind into March. European maintenance is also expected to rise further going into March (around a 1.0–1.16 mbd impact), reinforcing seasonal softness in crude runs. Technically, both benchmarks still sit above their rising 20- and 50-day moving averages with RSI in the low-60s, signaling positive (but not stretched) momentum. The main bullish swing factor remains geopolitics. U.S.–Iran talks have been extended with technical discussions set to resume in Vienna, while U.S. leadership has publicly attached a short deadline window—conditions that keep tail-risk around Hormuz non-trivial even if the modal outcome is no disruption. If March headlines re-escalate (talks break down, shipping guidance tightens, or any transit interruption occurs), Brent is technically positioned to probe above the February peak near $72.4/bbl; a sustained settlement above that level would plausibly open a path toward the mid-$70s as momentum buying and producer/consumer hedging intensify. WTI’s equivalent upside trigger is a clean break above the ~$67.3/bbl February high, which would likely require either a broad risk-on impulse or renewed tightening in U.S. balances. The more fundamental base case is range-to-lower: if diplomacy keeps de-escalation credible and maintenance-driven run cuts translate into rising crude inventories, the market can give back part of February’s premium. That downside is reinforced by supply policy risk: the eight OPEC+ members have reaffirmed that March increments remain paused, but they meet March 1 and have been considering a small April increase, around 137 kbd; Gulf producers have also signaled readiness to push more barrels to market. Technically, first support for Brent is near $69.3/bbl, then at $67.5/bbl; for WTI, around $64.5/bbl and then at $62.8/bbl. A weekly close below those zones would indicate the market is rotating back toward the global surplus framing rather than pricing disruption risk.

World oil supply plunged by 1.2 mbd in January to 106.6 mbd, according to the most recent data of the International Energy Agency, as severe winter weather disrupted North American operations, while outages and export constraints curtailed Kazakh, Russian and Venezuelan flows. Late-month Arctic conditions in the U.S. curtailed upstream operations across multiple basins, with estimates suggesting up to 2 mbd of crude production temporarily shut in during the cold snap. In addition, prolonged disruptions at Kazakhstan’s key export terminal since November were compounded by a power outage at the country’s largest field last month, temporarily tightening Atlantic Basin light crude markets. In parallel, OPEC+ maintained a cautious policy posture: the group reiterated that the planned incremental increases would remain paused into February and March 2026, effectively privileging stability over a faster normalization path as seasonal demand softness approached. In this context, global oil supply is expected to rebound in the coming months as output recovers from the exceptional plunge in January. Following gains of nearly 3.1 mbd in 2025, world oil output is now forecast to rise by 2.4 mbd in 2026, to 108.6 mbd, with growth roughly evenly split between non-OPEC+ and OPEC+ producers.

The U.S. Energy Information Administration also reported that global liquids production materially stepped down in January 2026. World output averaged 106.325 mbd, falling by 1.715 mbd versus December, a 1.6% MoM decline that dragged supply to the weakest level in six months and marked the sharpest month-to-month drawdown in roughly two years. Despite that abrupt monthly downtick, the annual comparison still pointed to a structurally higher supply baseline: global production was 3.225 mbd above January 2025, up 3.1% YoY, extending a sixteen-month run of year-on-year expansion even as the growth rate cooled to the softest pace in six months. Relative to longer-term seasonal norms, the market continued to run long on availability, with world output exceeding the January five-year average by 6.973 mbd, about 7.0% above trend.

OPEC crude production eased in January 2026, marking a clear inflection after a long, steady climb through most of 2025. According to cartel’s own data, group output fell by 111 kbd from December to 28.453 mbd, representing a 0.4% MoM decline that snapped an eight-month expansion streak and printed as the steepest monthly rate of contraction in 16 months. The pullback left OPEC at its lowest level of crude production in four months, which is notable given that December had been a multi-year high. However, January’s OPEC decline was not driven by a broad-based retrenchment among core Gulf producers—Saudi Arabia, Iraq, the U.A.E., and Kuwait all rose—but rather by sharp pullbacks in Venezuela and Iran alongside renewed slippage in Nigeria, with smaller additional drags from Gabon, Libya, and Algeria. On an annual comparison, supply still ran materially above the prior year: production exceeded January 2025 by 1.775 mbd, implying a 6.7% YoY increase and extending the upward year-on-year run to 14 months, although the growth rate moderated to the slowest in five months. Versus seasonal norms, the cartel remained elevated, standing 1.218 mbd, or +4.8% above the January 5-year average, a premium consistent with the broader OPEC+ strategy of controlled normalization while guarding against a visible surplus into early 2026.

The core OPEC+ producers kept March output policy unchanged at their early-February meeting, effectively extending the pause in planned production increases through March. The statement and accompanying commentary leaned on discipline and compliance, which is a familiar signal that—behind the “no change” headline—the group is still focused on keeping members aligned with targets and limiting any overproduction that could weaken the price floor. In practical terms, OPEC+ chose to preserve near-term supply restraint rather than add barrels into a period that is often seasonally less supportive for demand. By mid-February, market attention had already shifted away from the March “hold” decision toward what happens next. The market narrative increasingly framed April 2026 as the real inflection point, with reporting indicating OPEC+ was leaning toward restarting output increases from April, subject to confirmation at the March 1, 2026 meeting of the same key participants. That positioning shows the group is trying to balance two objectives at once: maintaining credibility and price support through Q1 restraint, while keeping optionality to regain supply (and potentially market share) in Q2 if balances tighten or if prices remain resilient.

Non-OPEC total oil supply in January 2026 averaged at 71.90 mbd, printing the lowest level in seven months. Output fell by 1.45 mbd from December, a 2.0% drop MoM, marking the steepest monthly contraction in two years. However, the headline decline concentrated in a handful of jurisdictions rather than a synchronized global pullback. The month reads as a stress test for operational resilience under winter conditions and for export-route fragility in Eurasia: North America absorbed a pronounced, weather-driven interruption late in the month, while Kazakhstan’s system was simultaneously challenged by a major field outage and constraints around its primary export outlet. In annual terms, non-OPEC oil production still was 1.44 mbd above January 2025, rising by 2.0% YoY. The expansion streak versus a year ago lengthened to 13 months, but the pace cooled to the weakest in six months, signaling that the growth profile is decelerating even before taking temporary outages into account. Relative to longer-term seasonality, non-OPEC oil production also remained elevated: January supply sat 4.28 mbd, or +6.3%, above the five-year January norm, a gap consistent with a post-2023 regime of higher non-OPEC baseline capacity utilization.

U.S. total oil output averaged 23.0 mbd in January 2026, down by 958 kbd from December, representing a 4.0% MoM decline that extended the nascent downcycle to a second month and represented the steepest one-month drop in two years, pulling the level to the lowest point of the past seven months. This abrupt monthly downdraft was driven by the late-January Arctic outbreak that triggered widespread freeze-offs and operational upsets across key producing and midstream corridors, most notably in the Permian, where market estimates put crude shut-ins at up to ~2 mbd at the peak of the disruption before conditions normalized toward month-end. However, even after that sharp monthly setback, January U.S. output still ran 381 kbd above the year-ago level, rising 1.7% YoY and extending the long-running annual expansion to 16 months, although the growth rate cooled to the weakest in 15 months—an important sign that the U.S. supply impulse was decelerating into early 2026 even before considering weather noise. Versus longer-term seasonal norms, the level remained structurally elevated: total output stood 2.495 mbd above the January five-year average, a 12.2% premium, underscoring that the U.S. energy sector was still operating well above recent-history seasonality despite the storm-driven interruption.

U.S. shale output absorbed the brunt of the January shock in the United States, falling to 10.116 mbd. The month-to-month decline was 448 kbd, which corresponds to a 4.2% MoM contraction and drove shale to its lowest level in 12 months. January also represented the second consecutive monthly drop, so the segment entered 2026 with a two-month downward sequence, and the speed of the January fall was extreme by recent standards—again, the fastest monthly rate of decline over the last 24 months. The year-on-year profile, however, did not flip negative; shale still ran 101 kbd above January 2025, a 1.0% YoY gain that extended an extraordinary 57-month chain of annual increases. The crucial nuance is that this annual growth rate was the slowest over the entire 57-month window, which effectively dates January 2026 as the weakest annual growth print for shale in nearly five years and points to a meaningful deceleration even after allowing for weather volatility. Against the five-year benchmark, shale remained structurally elevated at 1.099 mbd above the January seasonal norm, a 12.2% premium. In composition, shale represented 74.69% of total U.S. crude output in January. That share declined by 167.3 bps from December and was also lower than a year earlier by 53.7 bps, confirming that the severely reduced shale barrels in absolute terms.

The International Energy Agency has been revised world oil demand growth for 2026 moderately lower to 850 kbd as economic uncertainties and higher oil prices weigh on consumption. Meantime, the IEA has also revised down its assessment of global demand growth in 2025 to 770 kbd from 850 kbd earlier, implying thereby that the oil demand growth will continue in 2026, not stalled. As in 2025, non-OECD regions account for the entire increase. China remains the largest contributor to growth, of around 200 kb/d in both years, albeit well below its average growth over the past decade. Petrochemical feedstock products will represent more than half of this year’s gains, compared with only a third in 2025 when transport fuels dominated growth.

The U.S. Energy Information Administration reported that global oil consumption pulled back sharply in January 2026, averaging 102.69 mbd. The monthly move was decisively negative: volumes fell by 2.489 mbd versus December, a 2.4% MoM contraction that also marked the steepest monthly decline in 24 months. The downturn was large enough to drag the level to the lowest point in 10 months and to snap a two-month sequence of sequential gains. Despite that abrupt seasonal-looking reset, the annual comparison remained constructive: global consumption was higher by 1.325 mbd than in January 2025, translating into a 1.3% YoY increase and extending the long-running annual expansion to 59 months. Relative to longer-term seasonal norms, global oil demand stayed elevated, exceeding the January 5-year average by 5.069 mbd, a 5.2% premium. The January 2026 downturn was broad-based across the major aggregates but uneven beneath the surface. The pullback was led by a sharp correction in Europe and a sizeable retrenchment across key non-OECD regions, while OECD Americas was a notable outlier that held firm on the month. Even after the seasonal reset, the world demand remained comfortably above both last year’s level and the 5-year January baseline, underscoring that the demand growth still remains robust despite the volatile month-to-month profile around the turn of the year.

The International Energy Agency estimated that observed global oil inventories rose by 37 mb in December 2025, taking global stock build in 2025 to an extraordinary 477 mb, or 1.3 mbd on average, a level not seen since 2020. Chinese crude oil stocks built by 111 mb last year, while oil on water swelled by 248 mb, of which sanctioned oil accounted for 72%. US NGL stocks rose by 49 mb, while OECD commercial stocks of oil rose by a counter-seasonal 3.9 mb in December, to surpass its five-year average for the first time since 2021. By contrast, relatively tight crude inventories in key pricing hubs put a floor for prices in a turbulent market facing numerous supply risks. As global refinery activity declines seasonally from an all-time high reached in December, and oil supply recovers from recent outages, it remains to be seen when surplus barrels finally move ashore in the Atlantic Basin.  Preliminary data show global stocks surged by a further 49 mb in January 2026.

Detailed statistics on the prior month, November 2025, confirms earlier IEA’s conclusions that the month marked a partial reversion from October’s inventory tightening. Total OECD commercial oil inventories rose by almost 2.0 mln tons versus October, implying a 0.4% MoM increase, the fastest growth over the last three months. Comparing to a year ago, inventories were 6.35 mln tons higher than in November 2024, corresponding to a 1.4% YoY gain. The annual growth profile strengthened further: November extended the upward trend to four months and delivered the fastest yearly rate of growth in 55 months. Despite this improvement, the level remained seasonally tight. Relative to the five-year average for November, total OECD inventories were lower by 21.83 mln tons, leaving a 4.4% deficit versus the seasonal norm. Although OECD total oil stocks returned to a modest monthly build, but the internal composition flipped versus the prior month: crude inventories moved lower while petroleum products rebuilt. That pattern is broadly consistent with a post-maintenance normalization in refinery throughput and product output after the acute dislocations that characterized autumn operations, even though November still featured notable unplanned refinery outages that had previously tightened product markets.

U.S. total oil inventories eased in January 2026, but the headline softness masked a pronounced internal rotation between feedstocks and refined products. Total stocks ended the month at 1 703 mb, declining by 4.77 mb from December. That translated into a -0.3% MoM move and, importantly, it interrupted the two-month rebuilding phase that had carried inventories to multi-year highs at end-2025; in rate terms, it was the sharpest monthly decline of the last three months. Despite the pullback, the balance remained materially looser than a year earlier: total inventories were higher by 82.33 mb, a 5.1% YoY increase, extending the annual uptrend to seven months and posting the fastest yearly growth rate in 62 months. Versus the five-year seasonal norm for January, total inventories stood 15.01 mb lower, leaving them 0.9% below average—still close to normal on an aggregate basis, even as the subcomponents diverged markedly. The January 2026 mild headline draw in U.S. total inventories that was almost entirely the result of commercial stocks tightening, partially cushioned by ongoing SPR refilling. Inside commercial stocks, the decisive shift was a deep NGL draw that more than offset a small crude build, while petroleum products—especially gasoline—continued to accumulate and pushed the products aggregate to multi-year highs.

Cushing crude inventories continued to recover in January 2026, extending the rebound that began in December and pushing the hub to its strongest level in five months. Stockpiles increased by 1.93 mb versus the prior month, an 8.7% MoM rise, and the build marked the fastest monthly growth rate recorded over the last six months. That acceleration matters because Cushing is the physical delivery point for NYMEX WTI and a central junction for inland pipeline flows, so even modest absolute changes can carry disproportionate informational value for prompt WTI physical balance. The year-on-year picture flipped decisively. Inventories were higher by 3.10 mb relative to January 2025, a 14.8% YoY increase, which broke a 14-month run of annual declines. This growth rate also ranked as the strongest in 15 months, indicating a genuine inflection rather than a marginal easing of the prior tightening trend. Despite the improvement, Cushing remained structurally underfilled versus seasonal norms. Stocks were 9.21 mb below the five-year average for January, leaving inventories 27.7% under typical levels for this time of year. That gap suggests the hub’s buffer is still thin enough to keep sensitivity elevated to short-lived disruptions in pipeline scheduling, refinery demand, and export-linked flows.

Global offshore oil inventories extended their late-2025 contraction into January 2026, with the worldwide total slipping to about 111.1 mb, according to data provided by Vortexa Ltd. Stockpiles fell by 10.72 mb from December, an 8.8% drop MoM, leaving the aggregate at the weakest point in three months and marking a second consecutive monthly decline. The annual signal still pointed to a structurally heavier “oil on water” footprint: inventories were higher by 37.98 mb versus January 2025, up 51.6% YoY, which prolonged a seven-month rising streak on a year-ago basis, albeit at the slowest yearly growth pace of the past three months. Versus longer-term seasonal norms, the system remained loose: the global level sat 25.64 mb above the January 5-year average, a 29.8% surplus. However, January 2026 was less about a clean global tightening and more about a reconfiguration of where offshore barrels sat. The geographic composition shifted aggressively away from Asia—where December’s exceptionally high offshore stock level partially unwound—and toward the Atlantic Basin, most notably the US Gulf Coast and the residual “others” bucket. The month’s signature looked consistent with a market still carrying surplus supply relative to seasonal norms, while episodic shocks (US freeze-related export interruption) and structural frictions (sanctions-driven delays and higher tanker costs) played an outsized role in determining the offshore inventory distribution at the margin.

AC - Oil Market Report - Feb-2026.pdf

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