Don't Expect $60 Oil In 2026

Don't Expect $60 Oil In 2026

$36 billion worth of oil will be released from strategic reserves of 32 countries, in an effort suppress the oil's price down price down. However, I don't believe those efforts will be enough.

International Energy Agency (IEA) has just approved the largest oil release from its member countries strategic reserves. As an emergency measure, 400 million barrels of oil will be channelled into the markets from sovereign reserves, which is more than double of the previous record of 182 million barrels in 2022. Replacing Russian oil in 2022 was mostly a supplier problem, while Straight of Hormuz is a major route for many suppliers, making the disruption of flow through it a global logistics challenge. I consider this to be objective stress signal on the oil supply market, which acts as upwards price pressure. The market seems to agree with me, at least in the short term, given that even on these news Brent Oil is still trading around ≈$90 per barrel.

While the release of oil reserves by IEA members will exert downward pressure on the price of oil while that release lasts - there is no free lunch. Not only those reserves would need to be replenished, but it also expose the IEA countries to increased risk due to reduced domestic oil supply. This is another supply stress factor that will need to be resolved.

Geopolitical risk is perhaps the most obvious driver behind the recent oil price increase, and even in case of a de-escalation the risk will decrease to levels that are higher than at the start of 2026. The damaged oil production and logistics infrastructure will also need to be restored and other similar costs covered. As such, the geopolitical risk baseline has been elevated, and it will remain elevated at least until the end of this year.

For these reasons, it will probably take a while for the oil prices to decrease towards the ≈$60 area. To be very specific - I don't believe oil will fall down to $60 in 2026.