The geopolitical oil risk premium is likely to remain capped due to global market oversupply, despite increased oil-price volatility, Fitch Ratings says. Any possible supply disruptions in Iran can be absorbed by an oversupplied market. Potential short-term supply increases from Venezuela are likely to be small, while a more material rise in the long term would be quite challenging. OPEC’s future strategic stance on volume versus value will be important in shaping the oil market.

Our Brent price assumption for 2026 is USD63/bbl, while our ratings for oil and gas companies focus on credit metrics based on our mid-cycle price of USD60/bbl.

The global oil market will remain oversupplied in 2026. We estimate a supply increase of 3 million barrels per day (MMbpd) in 2025 and forecast a further increase of 2.5MMbpd in 2026, with demand growing by only about 0.8MMbpd each year.

Non-OPEC+ oil production contributes 55% and 48% to these increases, respectively, driven by the US, Canada, Brazil, Guyana and Argentina, according to the International Energy Agency. We expect some moderation in non-OPEC+ production growth in 2027. US oil producers need a WTI price between USD61/bbl and USD70/bbl to drill a new well profitably, according to the Dallas Fed Energy Survey.

Venezuela holds 17% of global proven reserves, the world’s largest resource oil base, but produced only 0.8% of global crude in November 2025. Venezuelan oil production dropped materially over the past 15 years – to 0.88MMbpd in 2024 from 2.5MMbpd in 2010 – due to sanctions and underinvestment. Its output hovered around 1MMbpd in September-October 2025 and fell to 0.86MMbpd in November 2025 due to sanctions and tensions with the US. Oil exports dropped to 0.67MMbpd.

The sale of crude held in floating and onshore storage in Venezuela and the removal of sanctions could lift Venezuelan oil output to about 1MMbpd in the short term. However, this is unlikely to materially affect the global market.

Venezuela will face challenges in increasing production by 1MMbpd-1.5MMbpd, potentially returning to 2010 levels of 2.5MMbpd in the long term. This would require substantial investment to modernise its dilapidated infrastructure. Most of Venezuela’s reserves are extra-heavy/sour-grade crude. Producing this oil requires advanced technical expertise, typically provided by international oil majors. Renewed investment by US and other international oil companies would require a reliable regulatory framework and fiscal stability in the sector, particularly given the expropriation of US oil companies’ assets in 2007.

Iran is a much bigger oil supplier in the global market, with 3.5MMbpd of output and about 2MMbpd of exports. Iranian crude supply has remained relatively flat despite tighter US sanctions (in its November sanctions, the Office of Foreign Assets Control targeted a network of Iranian trading and shipping companies). Material interruptions to Iranian oil production would boost prices, although the impact would still be limited given global market oversupply.

Russian output remains largely flat at 9.3MMbpd due to sanctions, with most exports redirected to China and India. Recent US and UK sanctions on Russian oil companies Lukoil and Rosneft could reduce Russian oil exports, as these producers account for about 50% of such exports. Conversely, a Russia-Ukraine peace agreement and lifted sanctions would be likely to have a limited impact on Russian volumes in the short term but could add further price volatility in an oversupplied market.

OPEC+’s spare production capacity of 4MMbpd will support the market in case of production disruptions. OPEC’s strategy and the balance between supporting prices and maintaining its market share will be another determining factor for the oil market if disruptions occur or if additional non-OPEC volumes enter the market.

Source: Fitch Ratings