Oil prices set to reach historic lows as Opec production surge creates global glut

Oil prices are heading towards their lowest point in two decades aside from the pandemic downturn, according to forecasts from JP Morgan. The bank projects the price of Brent crude will average 42 US dollars per barrel, approximately 32 pounds, during 2027 as increased production from the Opec group ignites a worldwide supply surplus. Should current trends continue unchecked, analysts believe prices could slip into the 30 dollar range by the close of that year, touching levels not seen since 2004.

The price of Brent crude has already declined steeply over the course of the year, falling from more than 82 dollars in January to 62 dollars in late November. This slide follows a significant increase in output by the Saudi-led Opec coalition, which has focused on expanding market share. As a result, global oil supply has risen sharply, while demand growth has cooled, particularly as Chinese consumers transition away from petrol and diesel vehicles in favour of electric alternatives.

JP Morgan’s analysts forecast that the oil production surplus will rise to 2.8 million barrels per day in 2026, an increase from 1.5 million barrels per day registered so far in 2025. Their research indicates that this oversupply will pressure Brent prices below 60 dollars in 2026, sink into the low 50s by the last quarter, and end the year with prices beginning with a 4. The outlook for 2027 signals further declines as surpluses accumulate and Brent settles at an average of 42 dollars, with a year-end slump into the 30s considered likely.

Other financial institutions anticipate similar developments. Deutsche Bank and Macquarie both anticipate Brent prices to fall to the mid 50 dollar range by the end of this year. These price declines would offer clear benefits to motorists and the wider economy, assisting families and reducing the cost of haulage, potentially triggering a noticeable fall in inflation as savings are passed to consumers.

The International Energy Agency’s latest data reports that global oil supply has expanded by a significant 6.2 million barrels per day since January. Global stockpiles ballooned by 77.7 million barrels in September, reaching their highest level since July 2021. Saudi Arabia increased output by 1.5 million barrels per day from January through October, while Russian production only grew by 120,000 barrels per day due to ongoing sanctions and operational challenges.

Although the supply surge is clear, the Agency notes that geopolitical instability and new sanctions mean the future supply picture remains uncertain. Previous quarters saw strong demand pull, but the last three months of the year show oil consumption growth easing, while crude supply is set to continue rebounding. Consequently, the market balance looks increasingly unsettled as supply outpaces demand with no clear sign of reversal in the near term.