Oil Market Analyzed After a Challenging 2025
Key Points
- Oil prices dropped 17.73% in 2025 due to too much supply.
- OPEC+ changed its strategy from defending prices to sharing market.
- Extra oil from Russia, Iran, and Venezuela added to the supply problem.
- Demand growth was slow and uneven around the world.
- Prices will likely be lower in 2026, with oversupply concerns.
- Big price drops need to happen to make oil companies cut back on production.
In 2025, the cost of oil went down a lot – over 17%. This happened because there was too much oil being made, and things like political problems didn’t make prices go up as much as people expected. It’s like if everyone suddenly had more toys, the value of each toy would go down.
During the year, even though there were some disagreements and problems in the world, oil prices couldn’t keep going up. Experts said that there was simply too much oil available. This means that the market was very sensitive to having too much oil.
As of January 1st, 2026, the price of WTI Crude oil had fallen about 17.73% over the past year. Currently, WTI Crude is down 0.91% at $57.42 per barrel. This means that the amount of oil being sold is more than the amount people are buying.
The International Energy Agency (IEA) said that in 2025, countries were making more oil than people were using. This caused oil storage to fill up across many countries. OPEC+, which includes countries like Saudi Arabia and Russia, decided to make more oil available.
OPEC+ started making more oil in April 2025, adding about 138,000 barrels per day. They kept increasing this amount, reaching over 400,000 barrels per day in the middle of the year. They then slowed down, adding around 137,000 barrels per day by the end of the year. Overall, they increased oil production by almost 2.9 million barrels per day.
Navneet Damani, a researcher at Motilal Oswal Financial Services, explained that the most important thing is that supply is bigger than demand. People are still using oil, but not enough to use up all the extra oil that’s been made.
Countries like Russia, Iran, and Venezuela were still selling oil, which added to the extra supply. People were worried that these countries would cause problems, but this worry didn’t make oil prices go up. Floating storage, where oil is stored on ships, also increased.
Demand didn’t grow very quickly. China was still buying a lot of oil, but they were storing it instead of using it right away. Plus, more people were buying electric cars, which use less oil. Small problems with oil production in places like Libya and Nigeria only made prices go up a little, but the extra oil quickly fixed the problem.
Looking ahead to 2026, experts think oil prices will stay low unless oil companies make a big change. Prices will likely be lower than in 2025 because there’s too much oil and it’s not being used up fast enough. Kaveri More, an analyst, says that OPEC+ won’t be able to control prices and that the US will keep making a lot of oil.
The price of oil has repeatedly tried to go higher, but it couldn’t break through certain prices. This shows that oil prices are likely to stay low or around a certain level. If the price goes down too far, it could mean that oil companies will have to cut back on production.
The most important question for 2026 is how low oil prices need to go before oil companies start making them cut back. Until then, prices will likely keep falling.
“Supply, not demand, is the dominant driver heading into 2026. Demand is growing, but not fast enough to absorb the excess barrels already in the system.” – Navneet Damani
