Cheap crude for now

As of November 2025, global crude oil markets are shifting again. After a brief rebound earlier in the year, prices have slipped back as supply continues to outpace demand. Most indicators now point to a softer price environment heading into 2026—unless a major disruption changes the equation.

The benchmarks reflect this trend clearly. Through mid- to late-November, Brent crude has been hovering in the low-US$60s per barrel, while U.S. benchmark West Texas Intermediate (WTI) has stayed in the high-US$50s.

What’s driving this weakness? According to the International Energy Agency (IEA), global oil supply reached roughly 108.2 million barrels per day in October and is expected to rise by another 3.1 mbpd in 2025 and 2.5 mbpd in 2026. Demand, however, is growing at less than 1 mbpd and is projected to stay at that subdued pace next year. This widening gap signals a clear surplus—at a time when many had expected markets to tighten—leaving producers with far less pricing power.

Most forecasters now expect oil prices to remain under pressure through late 2025 and well into 2026. The U.S. Energy Information Administration (EIA) projects Brent averaging around US$54/bbl in first quarter of 2026 and roughly US$55/bbl for the full year, driven by continued inventory builds.

The IEA also warns that the surplus could deepen, keeping prices depressed unless significant supply cuts or stronger-than-expected demand materialize. Some analysts, including Goldman Sachs, even see Brent slipping into the US$40s in 2026/27 if non-OPEC supply stays strong or global growth weakens. In other words, unless there is a major geopolitical shock, sanctions-driven supply loss, or a sudden demand surge, the most likely scenario is a low-to-moderate price range through 2026.

Looking further ahead, the picture becomes less certain, but a few themes stand out. Once the current surplus clears, prices could gradually firm up. But long-term headwinds remain.

Slower transport-fuel growth due to EV adoption and efficiency gains, plateauing oil-intensive industrial activity, and the ongoing energy transition. On the supply side, a sustained upswing in prices would likely require a mix of under-investment, natural field declines, or significant geopolitical outages. Without these, the “lower for longer” trend may persist.

For Pakistan, this soft-price environment is unexpectedly helpful. Cheaper crude provides immediate relief to the import bill and eases current account pressure. But it is also temporary—and should not become an excuse to delay overdue energy sector reforms or efforts to rebuild reserves.

Risks still loom. Large-scale supply disruptions in the Middle East, stricter sanctions on Russia, major OPEC+ cuts, or a stronger-than-expected rebound in global demand—particularly in Asia—could quickly reverse the surplus and push prices upward again.