While gold (XAU/USD) has significantly outperformed the S&P 500 and Nasdaq this year, oil is telling a very different story. Since January, Brent crude has dropped nearly 20%, with WTI falling even more, despite the news backdrop not changing significantly compared to 2024.
Geopolitical risks, for instance, remain high, especially around the Russia–Ukraine conflict. Ukrainian forces continue to strike Russian refineries, and attacks on Russian oil tankers in the Black Sea have intensified. On top of that, last week the US seized what President Donald Trump described as a “very large” oil tanker off the coast of Venezuela.
So why are oil traders barely reacting?
The main reason is that supply issues don’t seem imminent, keeping downward pressure on oil prices.
In particular, even though the IEA recently trimmed its 2026 oil surplus forecast for the first time in months — to 3.8 million barrels per day, down 231,000 bpd due to a pause in OPEC+ production increases, slower supply growth outside the cartel, and slightly stronger demand — the overall surplus is still expected to remain huge.
As for OPEC, it’s keeping its 2026 demand forecast unchanged at 1.38 million barrels per day—but historically, the cartel’s demand estimates have tended to be overly optimistic and rarely materialize.
Thus, while forecasts have been marginally adjusted, a massive supply surplus remains the base case for next year.
Added to this is the continuing slowdown in the Chinese economy, one of the world's largest oil consumers.
According to the latest data from the country, industrial production increased by a modest 4.8% year-over-year in November, while prices rose by only 0.4% month-over-month. The construction sector remains in serious difficulty, and consumption shows few signs of recovery. Retail sales rose by only 1.3% year-on-year and, more worryingly, fell by 0.4% month-on-month.
That said, China is likely to be forced to support domestic demand much more aggressively in 2025. For now, policy measures remain insufficient, although the authorities have recognized this and are signaling a more proactive fiscal stance, along with a moderately accommodative monetary policy.
Now, even if China manages to reignite rapid growth and increase energy demand, it won’t be enough to close the massive surplus gap. That’s why forecasts for next year remain cautious. For example, Goldman Sachs expects Brent crude to average $56 per barrel and WTI to average $52 in 2026.