- Oil prices have fallen by about USD 20 per barrel over the past year as global supply growth continues to outpace demand.
- Crude and natural gas liquids markets remain well supplied while refined product markets are increasingly tight.
- Limited refining capacity outside China is likely to prolong these imbalances despite rising global inventories.
Global oil prices have dropped by around USD 20 per barrel compared with early 2025 levels, reflecting a large supply surplus that has built up over the past 12 months. According to the latest monthly Oil Market Report, this headline surplus is masking sharply diverging trends across crude, natural gas liquids and refined product markets.
After several years of rapid growth, the expansion in global oil supply slowed abruptly towards the end of 2025. This followed major unplanned production outages in Kuwait and Kazakhstan, as well as sharp declines in output from Russia and Venezuela, both affected by sanctions. Despite these disruptions, global oil supply is estimated to have increased by 3 million barrels per day in 2025 and is forecast to grow by a further 2.4 million barrels per day in 2026.
Oil demand has risen at a much slower pace. Supported by improving expectations for global economic growth and trade, demand is estimated to have increased by just over 800 000 barrels per day in 2025, with a similar increase expected in 2026. Gasoil and jet and kerosene are driving roughly half of this year’s growth, while fuel oil continues to lose market share in power generation to natural gas and solar energy. Looking ahead to 2026, petrochemical feedstocks are expected to dominate demand growth, accounting for more than 60 percent of the total increase.
Although global oil inventories have risen sharply, reaching four year highs in October, stocks in key pricing hubs remain close to decade lows. This apparent contradiction is largely explained by the different dynamics within individual market segments. Crude oil and natural gas liquids remain amply supplied, while refined product markets have tightened due to limited spare refining capacity outside China.
Refinery outages in November initially added pressure to product markets, but conditions have since eased. However, new sanctions expected in the first quarter of 2026 are likely to create further challenges. The imbalance between rising crude supply and tight product availability has pushed refinery margins back to levels last seen in the period following Russia’s invasion of Ukraine. As a result, refinery run forecasts for 2026 have been revised upwards.
Price indicators continue to reflect weak crude fundamentals. North Sea Dated crude averaged around USD 63.63 per barrel in November, marking its fifth consecutive monthly decline and the longest losing streak in more than a decade. High volumes of oil stored on water, soft market conditions and low volatility have kept prices near four year lows, despite tighter sanctions and relatively strong diesel margins.
For African energy markets, the report highlights the growing importance of downstream capacity, fuel switching and petrochemical demand in shaping future oil balances. As global supply continues to outpace demand, the structure of refining and product markets will play an increasingly critical role in determining price stability and investment trends across the continent.
Link to the full report HERE
Author: Bryan Groenendaal
