Fitch Ratings has reported that the global oil market is entering a period of sustained oversupply. This surplus is likely to cap the geopolitical risk premium despite ongoing volatility in the Middle East and South America.
According to the agency, any significant supply disruptions from Iran can be absorbed by the current market surplus. Fitch has set its Brent crude price assumption for 2026 at 63 dollars per barrel. The agency notes that global production increases are significantly outpacing demand growth.
The oversupply is largely driven by non-OPEC+ producers including the United States, Canada, Brazil, Guyana, and Argentina. These nations are expected to contribute nearly half of the global supply increase in 2026.
While geopolitical tensions in Venezuela persist, analysts suggest that even a full return of Venezuelan crude would have a marginal impact. Rebuilding the dilapidated infrastructure in Venezuela to reach 2010 production levels would require over 100 billion dollars in investment and at least a decade of political stability.
OPEC+ currently maintains a spare production capacity of roughly 4 million barrels per day. This provides a substantial cushion against unplanned outages. However, the future strategy of the organization remains a critical variable as it balances price support against market share.
While US oil producers generally require prices between 61 dollars and 70 dollars per barrel to profitably drill new wells, the forecasted drop toward 60 dollars may lead to a moderation in non-OPEC+ production growth by 2027.
For now, the supply glut remains the dominant force in global energy markets. Even with tighter sanctions on Iranian shipping networks and uncertainty regarding Russian exports, the volume of oil on water and growing onshore inventories in the US and Europe are expected to keep a firm lid on price spikes.
The market remains in a state where fundamental supply strength outweighs the immediate fears of regional instability.
