Oil price trends between oversupply pressures and weak demand

Oil prices have recently experienced a wave of instability, influenced by worsening oversupply, declining global demand, geopolitical pressures, and increasing stockpiles. The current oil price mainly depends on the delicate balance between market supply and consumption, which are the key factors determining whether prices move up or down. Despite previous price crashes, recent rebounds raise real questions about the near- and medium-term outlook for oil prices.

Economic Background Shapes Oil Price Expectations

The global economy, especially China, is a fundamental determinant of oil price trends in the current period. China’s economy has slowed significantly since the real estate crisis erupted in 2022, and it has not been able to restore growth rates above 6% since October 2023, with a peak of only 5.4%, reflecting a substantial decline compared to historical averages.

Recent Chinese data confirm ongoing economic weakness: the quarterly growth rate in Q3 of last year fell to 4.8%, the lowest since Q4 of 2024. Meanwhile, retail sales sharply declined, with growth rates dropping from 6.4% in May to just 3% in September, over four consecutive months.

Chinese price indicators paint a bleak picture: the Consumer Price Index contracted by 0.3%, and the Producer Price Index fell by 2.3%, indicating persistent deflationary pressures. Additionally, the Manufacturing Purchasing Managers’ Index (PMI) has failed to surpass 50 points for six months straight, signaling ongoing economic stagnation.

China’s economic weakness directly impacts global oil demand, as China consumes about 14% of the world’s oil production. Therefore, any slowdown in Chinese economic activity proportionally reduces fuel demand, exerting downward pressure on oil prices.

Declining Global Demand Puts Pressure on Oil Prices

The International Energy Agency (IEA) forecasts that oil demand will grow modestly in 2025, by only about 710,000 barrels per day, a rate below the usual and historically expected growth. These estimates suggest that consumption growth may not be sufficient to absorb the additional supplies entering the market, continuing the downward pressure on oil prices.

The relatively slow global demand growth is due to several concurrent reasons: first, weak economic growth in major industrial countries like the European Union, the US, and Japan; second, the gradual shift toward clean and renewable energy sources, which increasingly pressures traditional oil demand; third, improved fuel efficiency across various industries.

Data show clear regional differences: while oil product consumption outside the OECD is expected to grow by about 1.2 million barrels per day, consumption in OECD countries is projected to decline by around 0.1 million barrels per day. This disparity reflects ongoing weak demand from advanced industrial nations.

Continuous Supply Increases Deepen Oversupply Crisis

On the supply side, global oil production continues to rise. In October, OPEC+ announced a plan to increase output by 137,000 barrels per day starting from November last year. Based on these plans, the IEA expects total global supply to reach approximately 106.1 million barrels per day, an increase of about 3 million barrels per day over previous estimates.

These increases by OPEC+ represent a reversal of the voluntary cut policies the organization has been implementing since 2023. This shift occurred because the market share of alliance members began eroding due to those cuts, especially for Saudi Arabia and the UAE.

In addition to OPEC+ increases, the IEA expects non-OPEC producing countries to add around 2 million barrels per day to the market. The US, for example, recorded a peak production of 13.6 million barrels per day in July last year, confirming continued sharp growth outside OPEC.

The inevitable result of this growing oversupply is the accumulation of global inventories. IEA reports indicate that stocks have reached record levels, including “floating oil” (shipments of oil on vessels waiting for delivery or sale). This buildup of inventories and pending shipments clearly shows that supply exceeds demand by a significant margin.

Political and Monetary Developments Attempt to Balance the Market

The Federal Reserve’s efforts to cut interest rates aim to support the economy and stimulate oil demand. Currently, US interest rates are at 4.25%, with expectations of further 25 basis point cuts in upcoming meetings. Normally, lower interest rates boost oil demand by encouraging economic and industrial activity.

However, the positive impact of rate cuts has been partly offset by the escalation of the US-China trade war. Recently, an agreement was reached to suspend the 100% US tariffs on Chinese goods in exchange for China’s commitment to increase US soybean purchases. This temporary deal gave a boost to oil prices in recent weeks, with the price per barrel rising from $61.25 to $65.68, an increase of over 7.1%.

Nevertheless, traders remain cautious about the stability of these agreements, especially after previous US threats to impose tariffs followed by reversals. This political volatility keeps the market in a state of ongoing uncertainty regarding future demand.

Expected Scenarios for Oil Prices

Combining supply and demand data, IEA estimates suggest a potential oversupply of about 4 million barrels per day in 2026. This figure is higher than previous forecasts and reflects ongoing downward pressure on oil prices.

As a result, Brent crude is expected to average around $62 per barrel in Q4 2025, with a possible decline to $52 in 2026. These levels indicate continued bearish pressure.

Conversely, OPEC is somewhat more optimistic, expecting demand to remain stable and grow by approximately 1.38 million barrels per day in 2026, with supply and demand balancing out in 2025 and 2026.

Major financial institutions offer varied forecasts: JPMorgan estimates Brent at around $66 by the end of 2025, while Morgan Stanley’s outlook is closer to $60. This divergence reflects the prevailing market uncertainty.

Technical Outlook Suggests a Short-term Rebound Amid Broader Downtrend

From a technical perspective, Brent is currently trading around $65.44, with a continued medium-term downtrend but some signs of a potential short-term rebound. The price is confined within a clear descending channel, positioned near its midpoint.

This downtrend confirms persistent selling pressure since Q3 2024, with repeated failures to break previous highs. This pattern indicates structural weakness.

Bollinger Bands show the price rebounded from the lower band near a strong support level around $59.9 and managed to break above the middle line, suggesting potential for further upward movement toward the upper band at $67.6, a key resistance level also intersecting the upper boundary of the broader descending channel.

The MACD indicator shows a positive crossover between the price and signal lines, providing an early bullish momentum signal after a period of weakness. This supports the possibility of a short-term technical rebound in the coming weeks.

However, the broader outlook remains bearish as long as the price stays below $70.8, a critical resistance level that separates continued downtrend from a genuine reversal.

In summary, Brent is currently in a short-term correction within a larger downtrend. It may target levels of $67.6 and $70.8 before facing renewed selling pressure. A break below $59.8 would confirm a resumption of the downtrend toward deeper support at $58.5.

On the bullish side, if oil prices successfully break and hold above $70.8, they could target $73.6 by the end of 2025 and move toward $74.9 in early 2026. Conversely, failure to build strong momentum could lead to declines toward $61.1 by year-end and then to $58.5 in early 2026.

How to Capitalize on Oil Price Movements

Unlike gold and other commodities that can be physically purchased, individual investors cannot directly own oil due to logistical complexities of transportation and storage. Instead, traders invest in oil through various methods: first, buying futures contracts and selling them before delivery; second, trading Contracts for Difference (CFDs), which is the most accessible method for retail traders.

CFDs offer strong profit opportunities despite high risks. Choosing a reliable, professional trading platform is crucial for good performance. Such platforms typically provide advanced analysis tools, real-time prices, economic calendars with key events, and news alerts—essential features for traders aiming to profit from oil price movements.

Developing trading skills requires access to structured training programs covering basic principles to advanced strategies. Professional platforms usually offer comprehensive educational resources to deepen market understanding and help traders develop suitable strategies.

Conclusion

Currently, oil prices are highly volatile due to excess supply and weak demand. Weak Chinese economic data and rising inventories exert downward pressure, while hopes for improved trade and monetary conditions provide some support.

Forecasts suggest oil prices may fluctuate between $60 and $70 per barrel in 2025 and 2026, with a general bias toward the lower end of this range. The technical picture indicates a short-term rebound opportunity, but the overall trend remains bearish unless prices convincingly break above $70.8.

Ultimately, the future of oil prices will depend on major variables: will global economic stimulus efforts succeed? Will the trade war stabilize or escalate again? Will renewable energy reduce demand faster? The answers to these questions will determine the real direction of oil prices in the coming months.