Russia and India’s Role in the Global Supply Outlook
Moscow New Delhi energy relations remain one of the key drivers shaping the structure of oil supply in Asia. Vladimir Putin’s promise of continued and stable fuel supply to India has helped ease part of the concerns regarding potential supply disruptions. The significance of this issue has grown in light of India U.S. trade negotiations.
Meanwhile, Bank of America has stated that oil could be the best contrarian trade of 2026, forecasting that WTI prices may rise to $96 a surge that, according to the bank’s analysts, could resemble this year’s swift and powerful rally in gold.
China: The Pillar of Global Demand in East Asia
China remains one of the most important demand side variables in the oil market. Official data shows:
China’s crude oil imports in the first 10 months of the year were 400,000 barrels per day higher than last year.
Part of these elevated imports is flowing into the country’s strategic reserves.
A high diesel crack spread has strengthened refineries’ incentive to increase processing capacity.
These factors have enabled China’s demand to withstand downward pressures and, in effect, serve as a price floor for the market.
Supply Side Pressures and Constraints on Price Growth
Despite supportive factors, the oil market is facing a set of structural pressures that prevent sustainable price appreciation:
1. Potential Increase in Oversupply
Reports from the International Energy Agency (IEA) and OPEC estimates indicate that an increase in excess supply is possible next year an issue that could add further weight to the bearish side of the market.
2. Growth in U.S. Crude Oil Inventories
Rising U.S. stockpiles typically cap oil prices and, during periods of stability, prevent the formation of bullish waves.
3. Unprecedented Reduction in Saudi OSP
Saudi Arabia’s official selling price (OSP) cut for January deliveries which has reached its lowest level in five years signals weak demand in Asia. This will likely prompt other OPEC members to adjust their pricing as well.
Geopolitical Variables: A Barrier Against a Deep Price Decline
Geopolitical risk remains the primary obstacle preventing a sharp drop in oil prices. The G7 and the European Union’s consideration of replacing the Russian price cap with a ban on maritime services could restrict Russia’s exports and reduce supply.
Additionally, the halt or slowdown in Russia Ukraine peace negotiations is currently generating a degree of supportive tailwind for prices, preventing a severe weakening of the market.
The Impact of U.S. Monetary Policy on Oil Prices
Expectations of a Federal Reserve rate cut have pushed the U.S. dollar down to its lowest level since late October. A weaker dollar typically supports dollar denominated commodities and helps prevent a steep decline in oil prices.
However, concerns over persistent oversupply and the potential increase in OPEC+ production prevent this supportive factor from turning into a sustained bullish trend.
Conclusion
The global oil market is currently positioned in a state of fragile equilibrium. A combination of forces has kept prices within a narrow range:
Bullish Factors
Geopolitical tensions and risks related to Russian supply
China’s steady and robust demand
A weaker dollar and the outlook for interest rate cuts
Bearish Factors
The possibility of oversupply in the coming year
Rising U.S. crude inventories
Saudi Arabia’s reduction of official selling prices and weak Asian demand
Under such conditions, traders and analysts must place particular focus on short term flows, geopolitical developments, and supply demand data. The oil market is prone to episodic volatility and rapid reactions in the months ahead, and professional decision making is only possible through continuous monitoring of news and fundamental indicators.
Author: Sabah Novinfar