Crude prices have slumped 23% this year and could head lower in 2026, even with heightened geopolitical tensions, simply because there is too much oil in the world.

How that news lands depends on where you sit. Consumers are helped bygasoline now priced $3 a gallon in more than half the U.S. states, according to theAmerican Automobile Association. Investors, however, could see oil-relatedstocks pressured as the oil price moves lower, though that could createopportunities for value hunters later next year.

Brent crude, the international benchmark, traded near $63 Friday morning,nearly $20 off its 2025 high set in January.

Oil supply would need to fall by about a million barrels a day to match demand,said Dan Pickering, founder and CIO at Pickering Energy Partners.

He sees two possibilities. One is “OPEC cuts, which seem unlikely given they havejust been spending all this time bringing oil back,” Pickering said. “Or we needlower U.S. supply, lower production from shale, which seems like it’s only goingto happen with a price signal.”

Analysts have a tough job. Estimates of market surplus vary between one to fourmillion barrels of oil a day in 2026. That makes forecasting prices tricky. Somesee a scenario where oil prices could collapse into the $50s per barrel or lower.

Another way to see all that supply is as a buffer against geopolitical disruption.Prices may stay steady despite risks to the energy markets, such as U.S. threats ofmilitary action in Venezuela.

President Donald Trump said on social media this weekend that Venezuela’sairspace should be considered closed. That has analysts on alert for a potentialmilitary strike, though Trump said not to read into the closure.

The market is also watching the efforts to end the war between Russia andUkraine, which could mean that now-sanctioned Russian oil barrels would returnto the world market and add to the supply overhang. Trump’s envoy, SteveWitkoff, is expected to meet with Russian President Vladimir Putin Tuesday.

The most likely scenario is that prices will fade below $60 toward $50 a barrel,but there is a low probability it will make an extreme move toward $40, said EdMorse, senior advisor to Hartree Partners.

Other actors could have a say on oil prices, including China. It has been makingsignificant purchases of oil for its strategic petroleum reserves.

A sharp falloff in prices could prompt action from the oil cartel OPEC and itsallies.

“If we do have this massive run-up in inventories, I think OPEC leadership doesreserve the right to come back in. I don’t believe they are going to repeat 2015,”said Helima Croft, head of global commodities strategy at RBC Capital Markets.Prices in 2015 fell below $40 a barrel.

OPEC+ has raised its output targets by 2.9 million barrels a day since April. Itannounced a 137,000 barrel a day increase for December. at the same time, itsaid it would pause returning more oil to the market during the first quarter of2026.

OPEC is waging a “long and shallow” price war against U.S. and other producers,said Francisco Blanch, head of commodities and derivatives research at Bank ofAmerica. He expects Brent to average $60-$65 per barrel range for the next fewmonths.

He puts the market surplus at two million barrels a day. It could take 18 monthsbefore the market comes into better balance, he says.

There still could be some slight growth from North American producers nextyear, as Guyana continues to add to global volumes.

But Blanch doesn’t believe the price will crater soon. “There will be buyers andthere will be China,” said Blanch.

Blanch expects China could buy another 200 million barrels in 2026.

Geopolitics will keep the most bearish forecasts at bay, Croft said.

For instance, Trump’s efforts to end the war in Ukraine has some oil tradersexpecting a deal. That could allow Russia to sell oil to more buyers, effectivelyraising competition.

But the European Union is reluctant to sign off on the peace plan, which wouldkeep Ukraine out of the 27-member North Atlantic Treaty Organization.

Even if there is a deal forged by the U.S., “so much of the architecture of thesanctions on the Russian energy system has been done by the Europeans and wecan’t just force 27 members to do what we want.”

Croft said there is also a bearish view that Venezuela’s oil will flood back into themarket if Venezuelan President Nicolás Maduro is ousted.

But it would take time for Venezuela to ramp up production. Its oil infrastructurein decline for decades, Croft said. Many Venezuelans who had worked in theindustry left the country. Venezuela now produces about one million barrels aday, a third of what it had produced at its peak.

All of this uncertainty could keep a floor under Brent.

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