Oil prices are likely to fall further in 2026 before stabilising, as supply growth to again outpace demand, though the downturn may be shallower than markets expect.

Analysts at Bernstein see Brent crude to average $65 a barrel in 2026, down from about $69 in 2025 but still above the $61 consensus. It sees 2026 as the bottom of the cycle, with prices recovering toward $70 in 2027, close to marginal cost levels.

China’s purchases for its strategic petroleum reserve may absorb some excess supply, but not enough to prevent a build-up in stocks. Downside risks are seen as highest in early 2026, with market conditions improving in the second half.

Bernstein forecasts global oil demand growth of about 0.8 million barrels per day next year, trailing non OPEC supply growth of 1.2 million bpd. An additional 0.5 million bpd of OPEC supply on an annualised basis is expected to add to oversupply pressures, leading to inventory builds and softer prices, particularly in the first half of 2026.

Bernstein expects LNG prices to face increasing pressure through 2026 as new supply comes online. It sees the JKM benchmark averaging $9 per mmbtu next year, down from about $12.6 in 2025 and below the $10 consensus.

A smooth political transition in Venezuela could eventually lift production by as much as 3 million bpd over the next decade, which would be bearish for prices. However a disorderly transition could disrupt current exports of about 1 million bpd, tightening markets.

Oil below marginal cost tends to curb reinvestment and support a future recovery. Spare capacity has risen to about 3.5%, near historical averages, while industry reinvestment rates remain below past norms.

Bernstein upgraded and , citing stronger free cash flow yields even at $65 oil, and downgraded and Sinopec, warning valuations there look stretched as the cycle turns.
Source: Investing.com