Markets open 2026 with cautious optimism
Crude oil prices edged higher on Thursday, the first trading day of 2026, as investors assessed geopolitical risks and awaited guidance from this weekend's OPEC+ meeting.
Brent crude futures rose to around $61 per barrel, while West Texas Intermediate (WTI) climbed toward $58. Both benchmarks are coming off their biggest annual declines in five years, with WTI falling nearly 20% in 2025.
OPEC+ meeting in focus
The oil cartel and its allies are set to meet virtually on January 4. According to Bloomberg, key producers led by Saudi Arabia are expected to reaffirm their decision to pause planned supply increases for the first quarter.
With global oil demand entering a seasonal slowdown, OPEC+ has signaled caution about adding more barrels to an already oversupplied market. The International Energy Agency forecasts a surplus of approximately 3.8 million barrels per day this year.
Geopolitical tensions add uncertainty
Several developments are keeping traders on edge:
- Venezuela sanctions: Washington has stepped up pressure on Venezuela's energy sector by targeting China and Hong Kong-based firms allegedly involved in bypassing export restrictions
- Russia-Ukraine conflict: Tensions flared over the New Year period, with strikes hitting Black Sea port facilities and damaging key energy infrastructure
- Middle East risks: Ongoing regional instability continues to pose potential supply disruption threats
US inventory data supports prices
Recent data from the U.S. Energy Information Administration showed domestic crude oil inventories fell by 1.9 million barrels last week. This marked the largest weekly draw since mid-November and exceeded market expectations for a 0.9 million-barrel decline.
The inventory drawdown suggests stronger-than-expected demand heading into the new year, providing some support for prices despite the bearish supply outlook.
Outlook for 2026
Analysts remain cautious about the price outlook for 2026. The EIA expects global oil inventories to continue rising through the year, putting downward pressure on prices. Their forecast sees Brent crude averaging around $55 per barrel in the first quarter and remaining near that level for the rest of the year.
Robert Rennie, head of commodity and carbon research at Westpac Banking Corp, anticipates lower prices throughout the first quarter due to ongoing oversupply concerns and potential diplomatic progress in the Ukraine conflict.
Key factors to watch in the coming weeks include the outcome of Saturday's OPEC+ meeting, winter demand patterns in the Northern Hemisphere, and any escalation in geopolitical hotspots that could disrupt supply.