Blasé Capital oil slick
India’s crude oil sector is trending toward continued growth in 2026, driven by robust domestic demand, even as global price dynamics point to moderation and oversupply risks, according to market experts. According to the Organization of the Petroleum Exporting Countries (OPEC), India’s oil demand will rise sharply in 2026, increasing to 6 million barrels per day (bpd) from 5.74 million bpd in 2025, an increase of over four per cent year-on-year. This growth outpaces that of China, and many other major economies, which underlines India’s emergence as a key driver of fuel consumption. The rising demand is fuelled by transport fuels such as diesel and gasoline, expanding road networks, stronger activity in manufacturing and services, and supportive government policies.
For India, the implication is a mix of opportunities and challenges. Lower global prices can further curb inflation, and reduce pressure on current account deficit, freeing up fiscal space for strategic investments. At the same time, India remains heavily dependent on imported crude to meet more than 85 per cent of its energy needs, exposing the economy to external prices, and geopolitical swings. us
Global prices are heading toward a prolonged phase of oversupply, with weakening demand signals, and expanding production weighing more heavily than geopolitical risks. Oil benchmarks have logged sharp declines in 2025, and market participants expect the surplus conditions to persist in 2026. Brent crude slipped below the $60-a-barrel mark, while West Texas Intermediate (WTI) is trading near $56. Both are down by nearly 20 per cent this year, which reflects a market increasingly dominated by excess supply.
According to Riya Singh, research analyst (commodities and currency), Emkay Global Financial Services, concerns around a structural supply glut are firmly anchoring market sentiment. “Oil prices moved toward a second consecutive weekly decline, as persistent concerns over a structural supply glut continued to outweigh geopolitical risks,” she says. She adds that the market will remain oversupplied into early 2026, and Trafigura projects Brent crude prices to stay in the $50 range through mid-2026.
Supply additions from both OPEC+, and non-OPEC producers have outpaced demand growth, while consumption expansion remains muted amid slower economic momentum in major economies. Although tensions surrounding Russian and Venezuelan crude have provided intermittent support, they have not been sufficient to reverse the broader surplus narrative. Thin holiday trading volumes have amplified the near-term price swings, reinforcing the downside pressure on prices in an already-fragile market.
Signs of oversupply are becoming increasingly visible in global crude trade flows, particularly for Russian oil. Singh points to growing dislocations in shipments of Urals crude, traditionally a key grade for the Indian refiners. “A growing number of tankers carrying Urals oil are idling off China’s coast as Indian demand fades under tighter US sanctions,” she notes. Data from Kpler shows that 3.4 million barrels of Russian crude are currently floating near China’s Shandong province, the highest level seen in over five years.
New sanctions on major Russian producers such as Rosneft and Lukoil, apart from the earlier ones on Russia, disrupted oil supply flows, while Indian refiners, including the private giant, Reliance Industries, remained cautious. Russian sellers reportedly offered Urals crude at steeper discounts than Iranian oil to attract Chinese refiners, underscoring how oversupply is reshaping trade dynamics.
Weak macroeconomic data from the US and China further clouded the demand outlook. According to a Tata Mutual Fund research note, MCX crude oil prices are likely to slip back toward the INR4,950 level, as concerns grow over the economic health of major consuming nations. The report highlights that the efforts by the US to push for an end to the Russia-Ukraine war can add to the downside risks. Any easing of sanctions on Russian energy exports will potentially bring additional supply into an already-crowded market, and this will further intensify the global oversupply concerns.
Despite the bearish backdrop, some factors may cushion sharper declines. OPEC+ has agreed to keep oil output levels unchanged for the first quarter of 2026, providing a degree of supply discipline. A weaker US dollar, and rising expectations of interest rate cuts by the Federal Reserve can lend near-term support to prices. OPEC estimates that global supply exceeded demand by around 500,000 bpd, reversing earlier deficit forecasts. However, it has lowered its outlook for crude demand from OPEC+ member nations in 2026 by 100,000 bpd, reinforcing the longer-term surplus view. Inventory data offers a mixed picture. US crude oil inventories are four per cent below the five-year average, while gasoline and distillate fuel stocks are also lower, signalling underlying demand resilience.
In 2026, crude oil markets will remain volatile but broadly range-bound. Persistent oversupply, subdued demand growth, and evolving geopolitical developments will continue to cap price recovery. While temporary rallies may emerge on supply disruptions or policy shifts, the balance of risks remains tilted toward lower prices. For major oil-importing countries like India, a softer crude environment may help further contain inflation, and improve external balances. However, global producers and exporters may face sustained margin pressure as the market adjusts to a new phase of structural surplus.
