Oil prices expected to fall in 2026 as Wall Street sees 'punishing oversupply' risking return to COVID levels

Commodity

Summary:

Wall Street expects oil prices to fall sharply in 2026 amid severe oversupply, with forecasts near $56–$60 Brent, though banks say producers will likely cut output before prices collapse.

Commodities strategists at Wall Street's top investment banks expect 2026 and 2027 to be tough years for the oil industry. And that's after a nearly 20% decline in oil prices this year.

Under a base case set by JPMorgan's commodities team led by Natasha Kaneva, Brent crude oil (BZ=F) — the international benchmark price — will fall to $58 per barrel in 2026, with West Texas Intermediate crude oil (CL=F), the US benchmark, trading $4 below this level. In 2027, the firm sees prices falling by another $1 per barrel.

"At the risk of flogging a very dead horse, our message to the market has remained consistent since June 2023," JPMorgan strategists wrote. "While demand is robust, supply is simply too abundant."

At Goldman Sachs, the bank's commodities desk, led by Daan Struyven, forecast a similar base case for Brent and WTI to trade hands next year at $56 and $52, respectively.

Goldman sees healthier price support in subsequent years, however, with Brent and WTI rising to $80 and $76 per barrel by 2028. This forecast assumes oversupply doesn't continue to dominate the market.

"We expect oil prices to pick up in 2027 as the market returns to balance and shifts focus to incentivizing investment given the reduction in oil reserve life, the maturing of US shale, and solid demand growth," Goldman Sachs analysts wrote.

Oversupply has been, and will likely continue to be, the dominant narrative for oil through this year, and this theme is expected to continue in the year ahead. While demand has remained healthier than expected, global supply has kept climbing.

The OPEC+ cartel has unwound production cuts every month since April, increasing output levels across the bloc by more than 2 million barrels per day. Meanwhile, US shale producers are expected to reach a record-high production level in December, according to data from the Energy Information Administration.

Through the first half of 2025, heavy stockpiling by China to the tune of millions of barrels per day had absorbed much of the extra supply on the market, supporting prices.

Demand from the Middle East has held steady, and Indian refiners have increased their purchases of Urals crude from Russia, according to several oil analysts who spoke with Yahoo Finance.

At the same time, there are more than 1 billion barrels sitting in tankers at sea globally, the highest level for on-the-water buildups since 2023. In its latest report, the International Energy Agency called for the widely foreseen 2026 supply glut to reach an overhang of 4 million barrels per day.

Given the "extraordinary oversupply anticipated" in the oil market, Macquarie analysts wrote, the Australian bank is modeling a similarly bearish price outlook for 2026.

"As a base expectation, [current market conditions] sets up for punishing oversupply in Q4 '25/Q1 '26, which we believe may necessitate a pronounced step lower in oil prices and OPEC policy pivot," Macquarie analysts wrote in a note to clients, targeting $60.75 for Brent and $56.63 for WTI in 2026.

The base cases from all three banks assume that the market will be forced to react and cut back on production as "low 2025-2026 prices take their toll on non-OPEC supply, and very few projects come online later this decade after 15 years of low investment," Goldman Sachs analysts wrote.

Even state-directed producers such as Saudi Aramco (2223.SR) and the UAE's Abu Dhabi National Oil Company in the Middle East need to turn a profit, and other geopolitical factors like the war in Ukraine have complicated the picture.

At JPMorgan, strategists predict that without some market stabilization efforts, Brent could change hands in the $30s per barrel by 2027, a level not seen since the depths of the 2020 oil crash at the start of the COVID-19 pandemic.

Such a move would bring prices near or below the break-even point of around $51 Brent and $43 WTI per barrel for US oil and gas operators.

But strategists at JPMorgan and Goldman Sachs believe the oil and gas industry will be forced to act on limiting supply long before prices reach these extremes.

"The magnitude suggested by market imbalances is unlikely to fully materialize in practice. Adjustments are expected on both the supply and demand sides," JPMorgan strategists wrote.

"We expect the market will find equilibrium through a combination of rising demand — driven by lower prices — and a mix of voluntary and involuntary production cuts."

Source: finance.yahoo

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Manuel

Commodity

Gold (GC=F) futures settled near $4,240 per ounce on Friday, closing out their fourth straight month of gains and bringing the yellow metal back within shouting distance of its record high on firming expectations for a December rate cut.

Dovish commentary from Federal Reserve officials has raised the odds that policymakers will decide to cut interest rates by at least 25 basis points next month. Since gold doesn’t produce income, its relative attractiveness improves when interest rates fall.

Gold hit a record high of $4,336 per ounce on Oct. 20 before falling about 10% through the first week of November. This year, the price of gold has risen more than 60%.

An easing in the US dollar (DX-Y. NYB) and expectations of continued fiscal spending and "run-it-hot" government policies heading into 2026 are also expected to support bullion prices.

"We have a tremendous deficit ... we also have a tremendous amount of government spending, and on top of that, we have a tremendous amount of central bank buying," Michele Schneider, Marketgauge.com chief strategist, told Yahoo Finance on Friday morning.

On Thanksgiving, President Trump said he aims to end the income tax, citing revenue expected from his tariff policy.

"Over the next couple of years, I think we'll substantially be cutting, and maybe cutting out completely ... income tax," Trump said. "We could be almost completely cutting it because the money we're taking in is going to be so large."

Trump's comments come after floating the idea earlier this month of a tariff “dividend of at least $2,000” for non-high-income earners.

“All of this [talk from Trump] is very inflationary, and that’s what gold is really responding to. I think $4,700 would be a good next target,” Schneider said, referring to her 2026 price forecast.

Following the largest one-day sell-off in over a decade, Wall Street analysts have remained bullish on the price of gold. The precious metal remains on pace for its best year since 1979, driven by central bank purchasing and increased inflows into exchange-traded funds (ETFs).

"We still expect continued central bank buying, alongside private investor flows under Fed easing, to lift gold prices to $4,900 by end-2026, with significant upside if the private investor diversification theme were to gain more traction," Goldman Sachs analysts wrote earlier this month.

Meanwhile, UBS recently raised its price target on the precious metal to $4,500 per ounce by mid-2026.

"Our view on gold remains bullish," UBS analysts wrote earlier this week. "We think gold’s role as a portfolio diversifier and geopolitical hedge is undiminished."

Source: Yahoo Finance

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Adam

Commodity

After its longest technical outage in recent years, CME said that all futures trading activity, including gold and silver markets, has resumed just ahead of North America’s trading session.

Trading on the CME was halted overnight following a technical disruption.

“Due to a cooling issue at CyrusOne data centers, our markets are currently halted. Support is working to resolve the issue in the near term and will advise clients of Pre-Open details as soon as they are available,” the CME Group said in an official statement.

Despite the overnight disruption, over-the-counter spot markets continue to show solid demand for the precious metals.

CME is the biggest exchange operator by market value. Although the outage has impacted some activity in gold and silver, the precious metals also trade on over-the-counter markets which continued to rally overnight.

The gold market has seen solid demand this week, with spot prices testing resistance at $4,200 an ounce overnight. The precious metal last traded at $4,175 an ounce, up 2.7% this week and trading near a two-week high.

Meanwhile, silver is once again testing resistance just below $54 an ounce. Spot silver last traded at $53.87 an ounce, up nearly 8% so far this week.

Some analysts note that while CME’s outage has disrupted markets, the impact has been limited due to thin holiday activity. U.S. markets were closed Thursday for Thanksgiving, and on Friday they will only be open for half a day.

“It has been a long while since we’ve seen an outage of this duration. Thankfully, it arrived on a relatively quiet trading day, with many US participants enjoying a long Thanksgiving break,” said Ole Hansen, head of Commodity Strategy at Saxo Bank, in a comment on social media.

The timing of the outage has also raised the ire of precious metals conspiracy theorists, who have flooded social media with comments. The outage occurred just as silver prices were testing new highs above $54 an ounce.

Rising silver demand continues to put significant pressure on the physical market, which remains in a permanent supply deficit.

Hansen dismissed many of the conspiracy theories floating around.

“The #silver conspiracists are having a field day, claiming the @CMEGroup, worried about a thin order book, shut down its entire platform to prevent a breakout. Needless to say, that’s complete nonsense. And before the comment area lights up like a Christmas tree, do note I have been bullish on silver since 2022, and expect prices to climb further in the coming months,” he said.

Source: Kitco

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Adam

Stocks

Stocks Edge Higher, But November’s Losing Streak Looks Locked In

Daily S&P 500 Index (SPX)

U.S. equities are drifting higher Friday, though volumes are thin and the action feels more like a placeholder than a statement. A data center cooling issue at CyrusOne halted trading at the CME earlier in the session — the kind of disruption that can whip prices around when liquidity’s already scarce. And it doesn’t get much scarcer than the day after Thanksgiving.

At last check, the Dow was up 86 points, or 0.18%. The S&P 500 added 0.12%, and the Nasdaq ticked up 0.18%. Modest gains, but nobody’s popping champagne. With Wall Street running a shortened session and most desks lightly staffed, moves in either direction could get exaggerated. Traders know it — and they’re treading carefully.

A Tough Month for Tech

November’s been unkind, especially to the growth names. Doubts around AI profitability are creeping in, and investors are questioning whether the hype got ahead of the fundamentals. The Nasdaq’s down about 2% on the month — snapping a seven-month winning streak. The Dow and S&P 500 are also slightly lower, breaking six consecutive months of gains.

Still, some buyers are sniffing around. The thinking: beaten-down valuations could set up a year-end rally if sentiment turns. It’s a reasonable bet, but the market hasn’t fully committed yet. There’s interest, but not conviction.

Weekly Bounce Offers Some Relief

Despite the monthly drag, the week itself has been solid. The Dow’s up more than 2%, the S&P 500 is 3% higher, and the Nasdaq has rallied 4% — a welcome turnaround for tech longs who’ve been watching their screens bleed.

Energy and communication services are leading the charge Friday, up 0.81% and 0.84%, respectively. Consumer discretionary’s adding half a percent on Black Friday optimism. Healthcare’s the laggard, off 0.39%, while tech is barely budging — flat after a week of heavy lifting.

What to Watch

Daily Macy’s Inc.

Black Friday’s bringing modest bids to the big retailers. Macy’s is up 1.5%, Best Buy added 0.4%, and Walmart’s ticking higher. Costco, Target, and Dillard’s are fractionally green. Early reads on holiday spending could shape sentiment heading into December.

Nasdaq 100 and S&P 500: US Stocks Drift Higher as November Losses Loom_3

Elsewhere, SanDisk’s climbing more than 4% ahead of its S&P 500 inclusion — index funds are buying. On the flip side, Tilray cratered 14% after announcing a 1-for-10 reverse split. Never a good look for a stock already trading around a dollar.

Bottom line: the week’s been a winner, but November’s ending on a whimper. Buyers are nibbling, not feasting. The real test comes in December, when the market decides whether this pullback was a buying opportunity — or just the start of something bigger.

Source: fxempire

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Adam

Economic

Exchange operator CME Group (CME.O) said on Friday that some markets had reopened after global futures were thrown into chaos when the world's largest exchange operator suffered one of its longest outages in years.

The halt caused by a data centre cooling issue stopped trading across stocks, bonds, commodities and currencies. Trading had restarted by 1335 GMT after having been knocked out for over 11 hours, according to LSEG data.

QUOTES:

CHRISTOPHER KRAMER, PORTFOLIO MANAGER AND SENIOR TRADER, INVESTMENT GRADE CREDIT TEAM, NEUBERGER BERMAN, CHICAGO:

"It impacted a lot of the futures markets globally, it certainly had more of an impact on some of the key industrial metals, some of the commodity-linked futures markets, and then the equity futures side of things too, but it does look like it’s not necessarily impacting overall market activity this morning and or directional impacts.

"It certainly is a discussion for the next three to five years as we do embark on a lot of the data centre-specific issuance that’s going to be coming to markets, but also just the reliance on technology is the big theme.

"These exchanges have been backed by data centres for a long period of time now, with perfectly reliable consistency, I think this was a little bit of a unique situation from what it sounds like. I wouldn’t necessarily stress or take too much away from that. Obviously it continues to reinforce the need for secure and stable continuation of the markets as it pertains to data centres."

TED PARKHILL, CEO, INCLINE INVESTMENT MANAGEMENT, BOCA RATON, FLORIDA:

"We are a systematic trader, and as a quant firm, we follow daily signals. But going into the holiday, we placed all our trades on Wednesday. In a holiday period like today, we often don't have trades to place and were fortunate we didn't have to get into the market this morning. That's even more lucky because we usually do prefer to trade at the open, when volumes are best and we can get good pricing.

"But while the CME may have gotten lucky too because it was a holiday, and the impact probably will be minimal, I think there will be more systemic questions raised next week.

"I'm required to have a disaster recovery plan, to have redundancies and prove that I'm not a source of risk. Where is the CME's redundancy plan? Why couldn't they just flick a switch and move to a backup power or data center?"

FAWAD RAZAQZADA, MARKET ANALYST, CITY INDEX AND FOREX.COM:

"The market impact is quite significant because without the CME, spreads on spot gold prices, for example, would typically widen with spot liquidity providers not having much confidence in pricing without the future.

"This could bring all sorts of issues with it for traders, which makes it less than an ideal situation to trade. Traders speculating on the underlying gold and other futures markets can't exit their positions during the outage either. So, from a risk management point of view, it is a massive issue."

MIKHAIL ZHEREV, PORTFOLIO MANAGER, AMATI, LONDON:

"This isn’t just a trading issue, it's a reminder that data centres have become essential infrastructure and they are not 100% reliable, they have capacity issues.

"We’re pragmatic optimists on AI, we’ve invested in the AI supply chain.

"My anticipation is that life goes on but everybody will have yet another look at their data centre arrangements and invest more in ensuring reliable supply because the importance of data center uptime is higher and higher."

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO:

“Currency markets are taking this morning’s CME outage in their stride - functionality seems to be returning, and the EBS platform that handles FX trades is now running normally. Liquidity remains thin given that most participants executed month-end trades ahead of yesterday’s Thanksgiving holiday, and most major pairs are seeing choppy, but range-bound trading action with technical levels holding firm. Markets could hit some turbulence later this morning if benchmark prices remain muddled, but it looks as if that’s a relatively unlikely scenario.”

JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY:

"This is such a strange day, in that it's always very, very light volume. If there was to be a glitch day, today's probably a good day to have it."

ALEX MORRIS, CHIEF INVESTMENT OFFICER, F/M INVESTMENTS, WASHINGTON:

"Of all the 252 trading days of the year this could have happened, this probably was the luckiest for the CME. The rolls from one contract to another all happened earlier in the week and the trading volumes today, because it's a half-day for markets, everything was sleepy anyway."

"It's hard to compete" with the liquidity and market dominance of CME-traded futures contracts, he said. Still, "a lot of people at the CME are being called in and hauled in" on what might have been a slow day or a day off for them to do more testing of the systems.

Source: reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Economic

Americans are feeling rattled about the state of the economy. Donald Trump has batted away question after question from reporters on concerns over higher prices, just a year after he won an election promising to bring down costs.

While the White House has tried to reduce concern, floating tariff-funded $2,000 stimulus checks and removing import levies on certain agricultural imports, many consumers remain anxious.

Preparing for the holiday season, and bracing for the spending it often demands, Guardian readers across the US expressed apprehension – and explained how they plan to spend – in this economy. Many said the higher cost of necessities, like groceries, was imposing on their ability to buy gifts for family and friends.

“I love giving people gifts,” said Grace Brown, 34, of Charlotte, North Carolina. “I’m a person that pays attention all year and will keep notes in my phone if someone mentions something in July they may want.”

But this year is different. As prices have climbed over the last year, Brown said that her budget for gifts has shrunk. Things already feel squeezed: she and her fiance are already limiting eating out, and have agreed they won’t exchange gifts with each other this holiday.

“Prices for everything have gone up,” Brown said. “It’s kind of hard to have luxuries.”

Collection of key pricing data was halted during the shutdown, so it’s unclear how much higher prices have been rising. In September, the latest available reading, prices went up 3%, compared with 2.3% in April.

Regardless of the official data, consumers feel like prices have been climbing. On Tuesday, the Conference Board reported that consumer confidence had fallen to its lowest level since April, when Trump first announced his full slate of tariffs. The University of Michigan’s Surveys of Consumers, another measure of consumer sentiment, similarly showed drops in confidence after the summer.

“Being on a fixed income, we have had to cut way back on our spending for the holiday,” said Jeffrey Larimore, 68, of Caldwell, Idaho. “We had enough disposable income to go out to dinner, take weekend trips and spoil [my granddaughters]. Since the tariffs have raised the cost of living, we have cut out all of that.”

Ryan, a retired law enforcement officer in Texas, who wished to withhold his last name, said his family “can barely put food on the table” let alone do holiday shopping for his young children.

“I’m scrambling to find some way to preserve some aspect of magic for them,” he said. “I spent my life in service to my country. What he [Trump] has done in less than a single year breaks my heart.”

Recent surveys indicated that Americans are set to cut back on holiday shopping this year. Deloitte estimated that spending could be down 4% compared with last year, while the National Retail Federation said that after hitting a record high last year, the amount of money Americans are planning to spend this year is down 1.3%.

In addition to prices going up, more Americans are concerned about the labor market. While expectations of unemployment dropped after Trump’s election, it has been climbing up over the last year. This sentiment tracks with the slow rise in unemployment, which was 4.4% in September – the highest it’s been since October 2021. For many, this means that higher prices aren’t the only concern.

“My homeowner’s insurance is up, 2026 health insurance is up, property taxes are up for 2026,” said Sarah Tenbensel of Minneapolis. “I may need a second job very soon.”

Shari Dunn, 57, of Oregon, said that in addition to prices going up, “there is fear regarding employment and contacts”. “It’s more than just tariffs – it’s everything. The instability and fear,” she said.

Dunn said she is participating in the economic boycott taking place over the Black Friday shopping holiday, one of a handful of consumer boycotts that have been organized since Trump started his second term.

For some, this past year has meant opting out of the economy in frustration with national politics. Linda McKim Bell, 79, of Portland, Oregon, said that she has tried not to buy anything new since Trump took office.

“I have shopped all year at online thrift stores for my family gifts,” she said. “I am making the rest of our holiday gifts: orange marmalade and homemade pastries make great gifts. Will continue to buy items that are used as much as possible.”

Brown said that even though she and her fiance have agreed not to exchange gifts, she may make a trip to Asheville, North Carolina, and support local artists there as the community continues to recover from Hurricane Helene.

“Whenever we have money to spend, we try to spend it there with small businesses,” Brown said. “One thing I just remember from high school is my teacher would always tell us ‘you vote with your dollars’.”

Source: Theguardian

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Economic

Tuesday’s weak Consumer Confidence report was a good reminder of why some economists are calling our economy the K-shaped economy. The Conference Board Consumer Confidence Index fell 6.8 points to 88.7 in November, below expectations of 93. Moreover, it sits at levels similar to those of early 2020, when the pandemic shuttered the economy. Similarly, the University of Michigan Consumer Sentiment survey is slightly above 70-year lows. Both surveys indicate that a large majority of consumers are struggling. Within the surveys, the outlook on current jobs and job availability is low. Inflation, tariffs, politics, and the government shutdown are also weighing on the consumer and limiting big-ticket spending plans.

A K-shaped economy describes a post-crisis recovery where different parts of the economy and society are performing at sharply diverging rates, forming the two arms of the letter “K.”:

The upper arm (going up): Sectors, companies, assets, and people that benefit from the recovery and, in many cases, are wealthier than before the pandemic. This includes investors in technology stocks, big tech companies, the luxury sectors, high-income professionals, and asset owners.

The lower arm (going down): Sectors, small businesses, and people that continue to decline or stagnate even as the overall economy appears to improve. Examples include: the hospitality and travel industries, many lower-priced retail outlets, low-wage service workers, small businesses, and many middle-class and lower-income households.

The graph below, showing the stark divergence between the S&P 500 and the University of Michigan consumer survey best depicts the K-shaped economy. You can make similar K-shaped plots comparing stock markets, GDP, and megacap corporate profits versus small business closures, wage growth for low-income workers, and economic activity in the manufacturing sector.

Black Friday And Holiday Estimates

Black Friday kicks off a spending frenzy as consumers worldwide buy holiday gifts. Often, holiday sales, particularly Black Friday sales, can make or break the entire year. Given the weak consumer sentiment we outlined in the opening section, we thought it might be helpful to see a few estimates of what this year’s holiday season may have in store for consumption.

Adobe Analytics: US online sales forecasted to reach $11.7 billion, marking an 8.3% year-over-year increase from 2024’s $10.8 billion record.

National Retail Federation (NRF): Overall holiday spending for November and December is expected to exceed $1 trillion for the first time, driven by a projected 3.7% to 4.2% growth in total retail sales, slightly down from last year’s 4.8% surge.

Deloitte: They anticipate a more modest 3% rise in sales amid consumer caution over high prices and tariffs

Bain & Company: Predicts an outsized 11% increase specifically for the Black Friday weekend but a more restrained 4% holiday forecast. They expect shopper turnout to hit a record 186.9 million over the five-day Thanksgiving-to-Cyber Monday stretch, up from 183.4 million in 2024. Moreover, they suspect shoppers will be enticed with deeper discounts—averaging up to 28% off on electronics, toys, and appliances.

The graph below, courtesy of Bloomberg, shows a KPMG survey estimating the percentage of spending by broad product category.