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his is not the first time that the oil market has found itself oversupplied, with weak prices and the risk of a sharp collapse. That is the outlook for 2026, when production will grow faster than demand, which has slowed compared to previous years and will be slower than that needed to absorb the additional volumes extracted.

Global consumption in 2026 is expected to reach a new all-time high of 104.5 million barrels per day (mbd), about 10 mbd above 2010 levels. Supply, however, will exceed demand by about 2 million barrels per day: a seemingly modest gap, but enormous when the market sets prices at the margin.

The sector is in the abundance phase of its known cycle: where declining prices are followed by equally intense rebounds, though with timing that remains unpredictable. 

 

 

The structural slowdown of China 

The modest increase in demand in 2026—around 0.6 mbd—reflects profound changes in the global economy. The first concerns China, which is moving from a reliance on energy-intensive heavy industries to a more service-oriented model. Added to this is the rapid success of the electric car, strongly supported by the central planning of the Communist Party, which officially loves the market but in reality relies on command-and-control policies that induce people to purchase electric cars.

For over twenty years, Chinese demand has been the main support for international prices, culminating in a peak of $140/bbl in 2008—more than double the current level. Today, however, the weakness in prices towards $60/bbl is due to the stabilization of Chinese consumption at around 17 mbd, almost double the 9 mbd of 2008.

The rest of Asia is growing at a much slower rate. The OECD countries—which still account for almost half of global consumption—are recording declines. There are no surprises in Europe, given its flat economic growth, while demand is surprising in the United States—the world’s largest market, at 21 mbd, having remained essentially flat despite the economic expansion. 

 

 

The American car and the cost of gasoline

Mobility continues to depend almost exclusively on petroleum products. In the United States, there is significant scope for improving the efficiency of the car fleet. Improvements in average fuel consumption are indeed ongoing. At the same time, electric cars are slowly gaining popularity—albeit at a rate far from that expected a few years ago—while changes in lifestyle and work habits are simply leading to less frequent car travel.

However, the consumption levels of American drivers remain exceptional, with average engine sizes exceeding 3,000 cc—a habit that fuels an oil addiction that was already decried by President George W. Bush. For many Americans, cars are synonymous with freedom and are a necessity to cover the long distances that separate them from work, school, relatives, and retail. 

 

 

It is therefore not surprising that presidents are so sensitive to the price of gasoline at the pump: today it is around 3 dollars a gallon, far from the 4 dollar threshold that irritates voters. In European terms, this is €0.7/liter, compared to €1.7/liter in Italy, where taxes weigh heavily. Donald Trump has also put the price of gasoline at the top of his energy agenda, over and above his call for “energy dominance.” Despite his interventionism, the president is not opposed to excess supply, which means lower prices for oil and for gasoline.

Much less attention is paid to extractive industry in rural areas—Texas, Pennsylvania, North and South Dakota—where the fracking revolution was born, making the United States the world’s leading oil producer, gas producer, and LNG exporter.

In 2017, during his first term, Trump had to choose between taking advantage of the collapse in prices or protecting domestic producers, threatened by crude oil at $50/bbl. At the time, production was 9.3 mbd; today, with prices below 60 dollars. Since, production has risen to 13.3 mbd, with growth slowing but not stopping.

The resilience of fracking remains remarkable, and will continue to support expanding supply. 

 

 

OPEC’s decisive role and the Saudi dilemma

Also driving oversupply is OPEC’s position, which has 3.3 mbd of spare capacity—a level rarely reached—against a production of 28 mbd.

As always, the greatest weight falls on Middle Eastern producers and, in particular, on Saudi Arabia, which has guided the cartel’s policies for half a century. Saudi Arabia’s dilemma remains unresolved: maintaining high prices risks slowing demand and leaving part of its gigantic reserves underground. But accepting lower prices to sustain consumption and stabilize cash flows risks lowering the total take.

Prince Mohammed bin Salman—having hypothesized a rapid abandonment of oil by 2030— has had to face reality: Saudi Arabia’s wealth still depends decisively on crude oil.

In 2026, US policy, with Trump hewing closer to Saudi Arabia’s recent preference for low prices, could entrench the abundance part of the cycle. Low prices, however, disincentivize new investments and production, paving the way for a subsequent rebound. With demand continuing to grow, balance will be restored and prices will rise.

In the end, the only certainty in the oil industry is cyclicality—and price volatility.