Crude oil prices are projected to average $60 per barrel in 2026, according to the World Bank’s latest Commodity Markets Outlook, marking a decline from the $68 per barrel expected in 2025. The report suggests that the lower price will likely have a favorable impact on global inflation, providing relief to import-dependent economies and consumers.
The forecast points to a combination of rising oil supply and moderating consumption growth as key drivers behind the price drop. However, the World Bank expects prices to rebound to $65 per barrel in 2027, as weaker prices in 2026 prompt production cuts and market rebalancing.
“These forecasts assume no major escalation in armed conflicts, weak demand growth relative to the 2015–2019 average, a well-supplied oil market, and stable OPEC+ production,” the report stated.
Global Supply to Reach Record Highs
The World Bank projects that global oil output will hit new highs in 2025 and 2026. Total production is expected to increase by 3.0 million barrels per day (mb/d) year-on-year in 2025, reaching 106.1 mb/d, and further rise to 108.5 mb/d in 2026 — an all-time record.
Nearly half of the 2025 output increase is expected to come from OPEC+ members, supported by higher production targets. However, the report notes that non-OPEC countries will drive much of the growth in 2026, as new oil fields and capacity expansions come online.
According to the International Energy Agency (IEA), the expansion in supply will outpace demand growth, keeping prices under downward pressure in the short term.
Demand Growth Slows Amid Energy Transition
The outlook highlights a moderation in global oil consumption growth, with the IEA forecasting a 0.7 mb/d annual increase in both 2025 and 2026. Similarly, the U.S. Energy Information Administration (EIA) anticipates a 1.1 mb/d rise in each of those years — lower than the levels seen during the pre-pandemic era.
China and India remain pivotal to global demand trends, expected to account for 25% of consumption growth in 2025 and 40% in 2026. Yet, the rapid adoption of electric and hybrid vehicles in China continues to constrain the country’s appetite for oil. In contrast, demand across advanced economies is expected to remain largely flat, reflecting slower industrial activity and efficiency gains in transportation.
Market Outlook and Inflation Implications
Economists view the expected decline in oil prices as a positive sign for global inflation, especially in emerging markets where energy costs play a dominant role in price stability. Cheaper oil could ease fiscal pressures on governments that subsidize fuel and reduce costs for manufacturing and logistics sectors.
However, analysts also caution that persistently low prices may dampen investment in new exploration and production, potentially tightening supply in the long run. The expected rebound to $65 per barrel in 2027 is therefore seen as a correction following an oversupplied market.
At present, Brent crude trades around $63 per barrel, indicating that markets may already be anticipating a soft landing rather than a sharp downturn.
A Balancing Act for Oil Producers
For oil-producing nations, especially within OPEC+, the World Bank’s outlook underscores the delicate balance between maintaining market share and sustaining prices. As non-OPEC producers continue to expand output, traditional exporters may face renewed competition, compelling them to adjust production quotas to prevent further price erosion.
The next two years, analysts say, will test the resilience of oil-dependent economies and the pace of the global energy transition, as renewables and electrification steadily chip away at oil’s dominance.
Source: Accra Business News
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