In late December, the U.S. blockade on Venezuela and new EU sanctions on Russia's shadow fleet sparked market concerns over supply disruptions. Coupled with robust U.S. economic data, these factors drove a consecutive rise in oil prices. However, by the end of December, plans for renewed U.S.-Ukraine talks and potential Russia-Ukraine peace agreements reignited fears of a supply glut, leading to volatile and declining oil prices.
The global external environment is undergoing rapid changes, with significant uncertainties surrounding the Russia-Ukraine conflict, U.S.-Iran tensions, and the U.S. "reciprocal tariffs" policy. Nevertheless, considering OPEC+'s high fiscal breakeven oil price and the elevated costs of new wells in U.S. shale oil production, the Brent crude price is forecasted to average between $55 and $65 per barrel in 2026, while WTI crude is expected to average between $52 and $62 per barrel. The main views from Guosen Securities are as follows:
In December 2025, the average price for Brent crude futures was $61.6 per barrel, down $2.0 month-on-month, closing at $60.9 per barrel at month-end. WTI crude futures averaged $57.9 per barrel, decreasing by $1.6 month-on-month, and settled at $57.4 per barrel by the end of the month. Early in the month, an attack on Russia's Druzhba oil pipeline, a stalemate in Russia-Ukraine peace plans, and rising expectations for Federal Reserve interest rate cuts pushed oil prices higher amid volatility. By mid-December, the International Energy Agency's warning of a substantial supply surplus for the following year, combined with multi-party talks advancing Russia-Ukraine peace agreements, intensified market worries about oversupply, causing prices to fall and hit yearly lows.
On the supply side, OPEC+ announced a pause in production increases for the first quarter of 2026. The group had fully phased out its 2.2 million barrels per day voluntary production cuts from April to September 2025. During the OPEC+ ministerial meeting on September 7, 2025, a decision was made to prematurely unwind the 1.66 million barrels per day voluntary cut agreement reached in April 2023 over a 12-month period, with increases of 137,000 barrels per day scheduled for October through December 2025. However, in the November 30 OPEC+ meeting, the group decided to suspend the planned production increases for Q1 2026 due to seasonal factors.
Regarding demand, major international energy agencies project global crude oil demand growth of 830,000 to 1.3 million barrels per day in 2025, and 860,000 to 1.38 million barrels per day in 2026. According to the latest December monthly reports from OPEC, the IEA, and the EIA, crude oil demand for 2025 is forecast at 105.14, 103.85, and 103.94 million barrels per day, respectively, representing increases of 1.3 million, 830,000, and 1.14 million barrels per day over 2024. For 2026, demand is projected at 106.52, 104.71, and 105.17 million barrels per day, showing increases of 1.38 million, 860,000, and 1.23 million barrels per day compared to 2025.
In September 2025, seven Chinese ministries jointly issued the "Work Plan for Stable Growth in the Petrochemical and Chemical Industry (2025-2026)." China's refining sector faces overall overcapacity, with a significant portion consisting of outdated facilities predominantly owned by major state-owned refineries. The plan mandates strict enforcement of capacity reduction and replacement requirements for new refining projects, tight control over new refining capacity, and scientific regulation of the pace for new ethylene and paraxylene capacity deployment. Supported by clear policy signals against "internal卷" (internal competition), these measures are expected to significantly optimize the supply side of the refining and petrochemical industry.
Furthermore, amid a rapidly changing global external environment and considerable uncertainties related to Russia-Ukraine, U.S.-Iran tensions, and U.S. reciprocal tariff policies, the analysis accounts for OPEC+'s high fiscal breakeven oil price and the substantial costs of new wells in U.S. shale oil production. Consequently, the Brent crude price is projected to average between $55 and $65 per barrel in 2026, while WTI crude is expected to average between $52 and $62 per barrel.
Risks include fluctuations in raw material prices, volatility in product prices, and potential underperformance of downstream demand.
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