Oil Market Report - January 2026

January 2026 crude market performance was defined by a tug-of-war between a structurally comfortable supply narrative, supported by surplus talk tied to Venezuela normalization and broader 2026 balance expectations, and repeated, albeit different “shock absorbers” that kept risk premia alive, such as Iran escalation headlines, Kazakhstan outages, and late-month US winter storm disruptions.

EXECUTIVE SUMMARY

January 2026 crude market performance was defined by a tug-of-war between a structurally comfortable supply narrative, supported by surplus talk tied to Venezuela normalization and broader 2026 balance expectations, and repeated, albeit different “shock absorbers” that kept risk premia alive, such as Iran escalation headlines, Kazakhstan outages, and late-month US winter storm disruptions. Against that backdrop, both ICE Brent and NYMEX WTI front-month futures finished January sharply higher, but via a distinctly two-step path: an early dip toward the first-week lows followed by a geopolitically charged rally that was interrupted mid-month by a violent de-risking move and then re-accelerated into the month’s final sessions. As of Jan. 29, Brent gained $7.47/bbl, rising by about 12.3% to $68.32/bbl, while WTI added $6.79/bbl, up roughly 11.8% to $64.21/bbl. The lowest intramonth points in January were concentrated in the first week: Brent’s trough was a $59.75/bbl low on Jan. 5, while WTI’s deepest low was $55.76/bbl on Jan. 7, underscoring how quickly early-2026 pricing revisited oversupply comfort before the market repriced risk. The month’s highest levels were registered on Jan. 29, with Brent printing a $68.59/bbl high and WTI reaching $64.48/bbl, consistent with late-month headline intensity around Iran and fresh supply-side frictions.

Entering February 2026, the crude market is priced with a meaningful geopolitical premium after January’s breakout, but the fundamental base case still looks like a Q1 shoulder-season market where crude demand softens as refinery maintenance ramps up. The IEA has explicitly warned that a large surplus could emerge in Q1 2026 (around 4.25 mbd) as planned refinery shutdowns reduce crude intake. In parallel, the eight key OPEC+ producers are still operating under a policy of pausing further increases through Q1, with another monthly review due on Feb. 1, which should limit immediate supply growth but does not remove the maintenance-driven demand headwind. Near-term supply disruptions are the main swing factor. US winter-storm outages are already reversing (output still around 600 kbd below normal after peaking near 2 mbd), which argues for easing prompt tightness as February progresses. Conversely, Kazakhstan’s Tengiz restart is staged and the wider export chain has faced repeated interruptions; Reuters reporting suggests output normalization may be slow into early February, supporting nearby spreads and putting a floor under outright pricing. Demand signals are mixed: China’s extended Lunar New Year holiday (Feb. 15–23, with New Year on Feb. 17) implies robust mobility, but the effect on crude runs competes with global maintenance constraints. Technically, both benchmarks finish January above their 20- and 50-day moving averages, with RSI in the mid-60s—strong momentum, but not yet exhaustion territory. The immediate upside inflection is a sustained Brent break above $70/bbl (with headlines already pointing to $72 as a plausible risk-premium spike level), while WTI’s equivalent trigger sits around $65/bbl. A bullish February path would require either a fresh escalation around Iran (Citi has framed the current premium at roughly $3–$4/bbl) or a persistence of non-OPEC outages that offsets refinery maintenance. The bearish case is more macro/fundamentals: if Iran risk cools and US/Kazakh supply normalizes into maintenance season, Brent slipping back through $66 and then $64/bbl (with WTI through $62 and $60/bbl) would signal that the market is rotating back toward the IEA’s surplus framework rather than trading disruption risk.

The International Energy Agency estimated that global oil supply fell by 350 kbd month-on-month to 107.4 mbd in December 2025, sinking 1.6 mbd below September’s record high. Lower output from Kazakhstan and a number of Middle Eastern OPEC producers was partly offset by a sharp rebound in Russian production. Despite weak December readings, global oil supply recorded a robust growth since the start of 2025, with non-OPEC+ producers accounting for close to 60% of the 3.0 mbd total increase. Saudi Arabia has led the rise in OPEC+ supply following the unwinding of production cuts, while the Americas quintet of the United States, Canada, Brazil, Guyana and Argentina has dominated non-OPEC+ increases. Barring any significant sustained disruptions to output – and if OPEC+ stays the course with its current production policy and activity in the US shale patch avoids major downshifts – global oil supplies could increase by a further 2.5 mbd in 2026 to 108.7 mbd.

The U.S. Energy Information Administration also confirmed that global oil production eased in December 2025. According to the agency, world liquids output averaged 108.0 mbd in the month, down by 657 kbd versus November, a 0.6% MoM contraction that pushed production to the weakest level in four months. The speed of decline was also notable: it was the sharpest monthly drawdown in 15 months, implying that the month’s softness was not merely statistical noise but a broad-based downtick across producing regions. Even so, the supply backdrop remained materially looser than a year earlier. Global output was 4.79 mbd higher than in December 2024, recording a 4.6% YoY gain that extended a 15-month run of annual increases, albeit with momentum cooling to the slowest pace in four months. Relative to seasonal norms, production remained elevated: the level sat 8.40 mbd above the December five-year average, translating into an 8.4% surplus versus that baseline. The December dip in global oil supply was driven by a sizable retrenchment outside OPEC, partially offset by a modest OPEC increase.

OPEC crude output strengthened again in December 2025, extending the steady normalization that has been underway through most of 2025 as the wider OPEC+ alliance calibrated supply additions against soft seasonality and an increasingly well-supplied Atlantic Basin. Total OPEC crude production averaged 28.56 mbd over the month, rising by 84 kbd from November. This 0.3% MoM increase pushed the group’s supply to its new highest level in 33 months and marked an eighth consecutive monthly gain, with the pace of expansion the quickest in three months. In annual terms, production was 1.82 mbd higher than in December 2024, equals to a 6.8% YoY increase, extending the uptrend to 13 months; however, the growth impulse moderated versus recent readings, registering the slowest annual advance in four months. Relative to the seasonal 5-year benchmark, OPEC supply ran 1.53 mbd above average, implying a meaningful 5.7% gap for the time of year and consistent with the post-cut unwind that has been partially implemented since spring 2025 and then slowed into year-end amid oversupply concerns. December pattern was characterized by broad-based firmness across several core Gulf producers—particularly Saudi Arabia, the U.A.E., Iraq and Kuwait—set against pronounced weakness in Iran and Venezuela and a more mixed picture among the smaller African members.

OPEC+’s latest communication reinforces a policy of optionality around the additional voluntary adjustments agreed by eight participating countries (Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman). At their virtual meeting on 4 January 2026, the group reiterated that the production increases previously associated with these voluntary curbs will remain paused in February and March 2026, explicitly linking the decision to seasonal patterns. It also restated that the 1.65 mbd tranche of voluntary adjustments could be returned in part or in full, contingent on market conditions, and emphasized continued flexibility to extend the pause or reverse course—including in relation to the 2.2 mbd voluntary adjustments framework announced in November 2023. Alongside the supply stance, the statement leaned heavily on compliance mechanics. The eight countries reaffirmed full conformity with the Declaration of Cooperation under JMMC oversight and underscored their intention to fully compensate for any overproduced volumes since January 2024. They also formalized a cadence of monthly meetings to review market conditions, conformity and compensation, with the next gathering scheduled for 1 February 2026—a structure that effectively keeps decision latency low should balances tighten or loosen.

Non-OPEC liquids supply in December 2025 settled at 73.35 mbd, providing the unusually abrupt sequential pullback that arrived despite a still-comfortable annual expansion. Total non-OPEC supply retreated by 0.89 mbd versus November, a -1.2% MoM move that dragged the aggregate to the weakest reading in four months and represented the sharpest month-on-month contraction in almost two years. That drop was large enough to be meaningful in balancing terms because, at the global level, the IEA was already flagging a supply environment prone to surplus unless offset by disruptions or policy restraint. Even so, the annual comparison remained constructive: non-OPEC supply stood 2.52 mbd above December 2024, representing a 3.6% YoY gain that extended a 12-month run of annual growth, albeit at a slower pace than in much of 2025. Against seasonal history, the level was 5.48 mbd above the five-year average for December, equivalent to an 8.1% uplift. The month’s weakness dominated by a sharp CIS setback concentrated in Kazakhstan and a meaningful Americas pullback driven by softer U.S. output and a pronounced decline in Brazil, partly offset by continued strength in Canada. Asia-Pacific and Europe posted only modest slippage—largely reflecting a China-driven dip and Norway-led softness respectively—while Africa & Middle East also edged lower, with Angola the main drag and Oman the key offset. Even with the monthly drop, the broader picture stayed constructive in annual terms across most areas, implying December was shaped more by localized disruptions and operational volatility than by a generalized deterioration in non-OPEC oil producing complex.

December 2025 marked a clear inflection at U.S. total oil production, which slipped by 257 kbd versus November, recording a 1.1% MoM decline. This drop interrupted a five-month run of sequential gains and registered the sharpest one-month contraction seen in the past 11 months. Even with that setback, the year-end position remained materially firmer than a year earlier, with total output 885 kbd above December 2024, up 3.8% YoY. However, the annual expansion geared down to the slowest pace of the last five months, consistent with a late-2025 environment in which crude benchmarks had trended lower through the year amid oversupply, tightening the incentive to accelerate upstream activity at the margin. In level terms, U.S. total oil output averaged 23.96 mbd in December, sinking to the lowest reading of the past three months. Despite the monthly dip, the absolute level remained well above seasonal norms: the December figure exceeded the five-year average for this month by 3.13 mbd, translating into a 15.0% premium. These figures highlight the extent to which non-OPEC, and in particular U.S., supply continues to crowd the global oil market, particularly in a price environment that has been softening rather than tightening.

U.S. shale oil production ended December at 10.58 mbd. Unlike the conventional crude segment, shale supply slipped by 57 kbd from November, which equates to a 0.5% MoM decline and represents the fastest month-to-month rate of contraction observed over the last seven months. The monthly setback did not, however, alter the longer-run growth profile. On a year-on-year basis shale volumes were higher by 286 kbd, a 2.8% YoY expansion that extended an uninterrupted 56-month run of annual increases. Notably, that growth rate was the strongest of the last three months, so the annual signal strengthened even as the sequential print softened. Comparing to the five-year December average, shale production was 1.38 mbd higher, a 15.0% premium to the seasonal norm, underscoring how structurally shifted the U.S. tight oil system remains relative to its pre-pandemic baseline. Shale’s share of total U.S. crude production was 76.44% in December. The share fell by 27.4 bps from November, but rose by 28 bps compared with December 2024, reinforcing the conclusion that the medium-term growth engine in the U.S. remains tight oil, even if the month of December itself did not deliver incremental shale barrels.

The International Energy Agency again raised its global oil demand growth forecast to average 930 kbd in 2026, up from 850 kbd in 2025, reflecting a normalisation of economic conditions after last year’s tariff turmoil and lower oil prices than a year ago. A month ago, the agency forecasted this year global demand growth at 860 kbd. Despite somewhat better prospects, the IEA expects that a recovery in petrochemical feedstocks demand in 2026 will be partially offset by a continued slowdown in gasoline gains. Non-OECD countries will once again account for all of the growth in 2026.

As for December 2025 data, global oil consumption accelerated into year-end, according to the U.S. Energy Information Administration, and set a new multi-year high in December 2025, averaging 105.25 mbd. That level was up 0.7% MoM, reflecting an increase of 693 kbd versus November and extending the short-term uptrend to a second consecutive month. In historical context, December marked the new highest print in history, underscoring how firmly demand has pushed beyond the post-pandemic normalization phase. On a year-over-year basis, global oil consumption was up 1.9% YoY, translating into an expansion of 1.92 mbd versus December 2024 and extending the long-running annual growth streak to 58 months (almost 5 years). Notably, this was also the fastest yearly growth rate in three months, implying some re-acceleration at the margin. Relative to seasonality-adjusted dynamics, demand ran 5.03 mbd above the December five-year average, a 5.0% overshoot, which is consistent with the narrative in late-2025 that improving macro/trade conditions and product-specific strength (notably middle distillates and jet/kerosene in 2025, with petrochemical feedstocks increasingly important into 2026) kept the call on barrels resilient into year-end.

Global observed oil stocks surged by 75.3 mb in November 2025, or 2.5 mbd, according to the most recent estimates of the International Energy Agency, with crude oil accounting for 96% of the increase, mostly onshore. OECD commercial oil stocks were up by 7.3 mb to 2 838 mb, largely in line with the five-year average level. Total observed oil inventories were 433 mb higher than at the start of 2025, increasing by 1.3 mbd on average and reflecting the large global supply surplus that built up over the past 12 months, in line with IEA’s forecasts. The increase was visible in the surge in oil on water, higher Chinese crude stocks and a rise in US gas liquids inventories. Preliminary data point to further builds in December, most notably in China after new import quotas were issued, offsetting steep declines in crude oil inventories observed in a number of producer countries in the Middle East at the end of the year.

Detailed statistics on October 2025, however, didn’t confirm earlier IEA’s assessments regarding a further buildup in OECD commercial oil inventories within the month. The data showed a draw of 4.72 mln tons versus September, which equates to a 1.0% MoM decline. Beyond the magnitude, the composition of the move matters for interpretation: the October level of 467.5 mln tons was the lowest in four months, and it interrupted a three-month sequence of monthly builds. This monthly drop was also the fastest seen over the past 12 months, pointing to an unusually forceful tightening impulse relative to recent history. On a year-over-year basis, the overall stocks remained higher: inventories were up by 4.82 mln tons compared with October 2024, translating into a 1.0% YoY increase. The annual profile is notable for its momentum rather than its absolute scale. October extended an upward trend that has persisted for three months, and the 1.0% YoY growth rate was the fastest in 54 months. Against the seasonal benchmark, stocks were still meaningfully depressed: the level sat 24.49 mln tons below the five-year average for October, implying a 5.0% shortfall versus that reference.

U.S. total oil inventories ended December 2025 at 1 708 mb, rising by 19.96 mb from November. The increase translated into a 1.2% MoM gain and lifted the aggregate to its highest reading in 45 months, extending the short-term rebuild to a second consecutive month; in rate terms, this was the quickest monthly expansion in the past five months. On a year-on-year basis, total stocks in the United States were higher by 76.46 mb, equivalent to a 4.7% YoY advance, and the uptrend has now persisted for six straight months; notably, the annual growth pace was the strongest in 61 months, underscoring how decisively the U.S. inventory position has shifted versus late 2024. Even so, the level still sat 13.14 mb below the seasonal five-year norm for December, leaving the system about 0.8% under its typical end-year benchmark. December’s defining feature was not simply that inventories rose to multi-year highs, but that the incremental barrels were overwhelmingly “downstream”: a very large petroleum-product build occurred alongside a sharp crude & NGLs draw. With refinery utilization running in the mid-90% range in December’s weekly EIA cadence and multiple late-month reports highlighting product stock builds, the monthly configuration reads as a market that was well supplied in refined products even as crude balances were being managed more tightly into year-end.

Cushing crude inventories ended December 2025 on a firmer footing, with stocks rising by 0.82 mb from November. The increase translated into a 3.8% MoM gain and, importantly, it snapped a three-month sequence of month-to-month declines. In pace terms, December also delivered the strongest monthly expansion seen over the last four months. The annual comparison remained negative, but the tone was less acute than earlier in the downcycle. Inventories were lower by 0.43 mb versus December 2024, equivalent to a 1.9% YoY decline. This extended the downward trend to 14 months, yet the annual rate of contraction slowed to the mildest decline recorded over the last three months. The most emphatic signal in December was the structural deficit versus seasonal norms. Relative to the five-year average for this month, Cushing inventories sat 13.53 mb lower, leaving the hub 38.0% below the typical December level. This is a large gap in proportional terms and implies that—even after the monthly rebound—Cushing entered year-end with a materially thinner buffer than is usually available at this point in the calendar.

Global offshore oil inventories ended December 2025 at 122.3 mb, according to data provided by Vortexa Ltd., marking a sharp pullback from November: volumes fell by 10.63 mb, an 8.0% decline MoM and the quickest monthly drawdown in four months. That late-year dip, however, did not change the broader annual picture. Versus December 2024, offshore stocks were higher by 53.57 mb, up 78.0% YoY, extending an upward annual run to six consecutive months. Relative to seasonal norms, the market still carried a meaningful surplus at sea: inventories stood 36.51 mb above the December 5-year average, which translates into a 42.6% premium. In macro terms, the month’s cross-currents looked consistent with a market grappling with a global surplus and logistics friction: Reuters and tanker analytics cited unusually heavy crude “on water” signals into December, including slower laden-tanker speeds and commentary that supply was struggling to find a home, while expectations for firm tanker utilization into 2026 were linked to sanctions removing ships from effective availability. Regionally, the centre of gravity moved decisively toward Asia: the Asia build more than offset the combined monthly reductions in several Atlantic Basin and origin-region groupings, yet the global total still declined because the non-Asia drawdowns were collectively larger.

AC - Oil Market Report - Jan-2026.pdf

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