Oil prices drop 4% as OPEC shifts to balanced 2026 outlook

Oil prices fell sharply on Wednesday after OPEC revised its outlook for the global market, now expecting supply and demand to be balanced by 2026 rather than running a deficit. The change, outlined in the group’s latest Monthly Oil Market Report, sparked a sell-off that sent Brent crude down 3.7% to $62.77 a barrel and West Texas Intermediate sliding 4.1% to $58.55 by early afternoon in New York.

OPEC’s new forecast reflects stronger-than-expected production growth from non-member countries, particularly the United States, Brazil, and Guyana. The group projects non-OPEC liquids output will rise by about 1.3 million barrels per day next year. Global oil demand is expected to increase by 1.6 million barrels per day to 106.2 million, unchanged from last month but no longer sufficient to tighten market balances.

The revision removes the supply shortfall OPEC had predicted in October, suggesting that inventories and production capacity will remain comfortable through the middle of the decade. The report noted that OECD commercial stockpiles have returned to their five-year averages, while refining margins in Asia and Europe have narrowed for a second month in a row.

According to OPEC, the softer market tone stems from “ample spare capacity, healthy upstream investment, and stronger crude exports from the Americas,” factors that point to a more stable global supply picture after two years of tightness.

Traders reacted swiftly to the report, saying it reinforces the view that supply growth is outpacing earlier demand expectations. The International Energy Agency’s recent data also show slower consumption trends, further pressuring prices. As a result, hedge funds and other investors have been trimming long positions, accelerating the decline that began earlier in the week amid weaker sentiment and lower refinery runs.

OPEC+ has not changed its current production policy. Voluntary output cuts by Saudi Arabia, Iraq, and other members are set to remain in place into early 2026, though the report emphasized that the alliance retains significant spare capacity should prices continue to fall. Still, the group said overall fundamentals remain underpinned by new refining projects in Asia and continued investment growth across the Americas.