The global oil market in late 2025 is in a delicate balance — with too much supply on the one hand and ongoing geopolitical tensions on the other. The newest report from the International Energy Agency (IEA) shows that while global oil demand has grown a bit, the amount being produced still exceeds what is being used. As a result, the world is accumulating additional crude oil reserves that could reach about 4 million barrels per day by 2026.
Over the past few months, global demand for oil increased by around 750,000 barrels a day compared to last year. However, demand growth in both 2025 and 2026 is expected to stay slow — around 700,000 barrels per day each year, which is much less than the long-term average. On the supply side, production has surged. In September alone, worldwide oil output jumped by about 760,000 barrels per day, mainly because OPEC+ countries in the Middle East boosted production. This ongoing oversupply has pushed oil inventories higher, especially in China and the U.S., and has caused prices to drop. At the time of writing, West Texas Intermediate (WTI) crude is around $59 a barrel, and Brent crude is about $62 — both down roughly $12 from the start of the year.
Still, there are forces pulling prices in both directions. On the positive side, conflicts affecting Russian energy facilities, sanctions on Iran, and European limits on Russian refined fuels could create shortages in gasoline, diesel, and jet fuel even though crude oil itself is plentiful. Many refineries are already operating under strain, and shutdowns or bottlenecks could make it harder to produce enough refined fuels. On the negative side, the large amount of crude oil sitting on tankers at sea — which rose by more than 100 million barrels in September — could eventually move into storage on land, keeping prices under pressure.
In conclusion, oil prices are caught in a tug-of-war between excessive supply and potential fuel shortages. If global demand stays weak or stockpiles keep rising, prices may remain low. But if geopolitical tensions worsen or refining problems grow, prices could rebound. From an investment perspective, given the recent decoupling between oil prices and U.S. energy sector equities (e.g., XLE energy sector ETF below), we remain selectively positioned with a preference for well-capitalized, large-cap oil majors that offer attractive dividend yields and are trading at valuation discounts.
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This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results.
West Texas Intermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content.
Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.
