Oil Price Forecast - Oil Prices Drop Below $60 — WTI (CL=F) and Brent (BZ=F) Face Weak Demand and Fed Pressure

Oil Prices Drop Below $60 as Supply Risks, Fed Cut Bets, and Policy Shifts Collide

WTI (CL=F) and Brent (BZ=F) Extend Losses Amid Weak Demand and Rising Geopolitical Complexity

Crude oil continues its slide, with WTI (CL=F) trading at $59.15 (-1.55%) and Brent (BZ=F) at $62.79 (-1.51%), marking their weakest levels since mid-November. The decline reflects a complex mix of macroeconomic, policy, and supply factors—ranging from Federal Reserve rate-cut speculation, Ukraine peace talks, and Russian export restrictions to OPEC+ output inertia and persistent weakness in downstream fuel margins. Volatility has intensified across both futures curves, while refinery economics and geopolitical dislocations continue to skew market structure toward oversupply into early 2026.

Fed Rate Cut Expectations Weigh on the Dollar but Fail to Lift Oil

Normally, a softer U.S. dollar supports crude, but this week’s market response inverted. Traders are pricing an 84% probability of a 25-basis-point Fed cut at the upcoming FOMC meeting, according to LSEG data. Yet oil prices remain capped as investors interpret policy easing as confirmation of a slowing U.S. economy.
Demand data reinforces this view—U.S. gasoline consumption sits 5% below its five-year average, and jet fuel demand remains muted despite holiday traffic. The 10-year Treasury yield fell to 3.86%, underscoring risk aversion rather than risk appetite. Macro traders now treat energy less as an inflation hedge and more as a proxy for industrial activity, pressuring WTI to stay under its $60 resistance zone.

Ukraine Negotiations and Russian Supply Uncertainty Create Whiplash

Markets are reacting sharply to slow progress in Ukraine peace talks, as President Donald Trump’s diplomatic push has yet to yield concrete outcomes. Analysts estimate the difference between an extended stalemate and a near-term ceasefire could swing 2 million barrels per day of supply back into the market.
Adding to the confusion, Iraq shut down output at Lukoil’s West Qurna-2 field, halting 460,000 barrels per day due to a pipeline leak—briefly tightening near-term supply before prices resumed their descent. At the same time, the EU and G7 are weighing a maritime services ban that would replace the current Russian oil price cap, effectively prohibiting insurers and shippers from handling cargoes linked to Moscow. This measure, if enacted, could remove up to 1.2 million barrels per day from compliant markets but would likely be offset by shadow-fleet rerouting through Asia and the Middle East.

China and India Absorb Sanctioned Barrels, Blunting OPEC+ Leverage

Chinese independent refiners, leveraging new import quotas, have increased purchases of Iranian crude and discounted Russian ESPO blends, exploiting the wide Brent-Dubai spread. China’s total crude imports surged to a two-year high, averaging 11.4 million barrels per day in November, while India expanded Russian intake by 18% month-over-month. These flows undermine OPEC+’s output management and keep physical differentials under pressure.
Benchmark Murban crude trades at $64.52 (-1.65%), maintaining a narrow premium to Brent, signaling balanced but soft Asian demand. The OPEC basket stands at $63.24, essentially flat, confirming that coordinated cuts—nominally 3.6 million barrels per day through March 2026—have failed to trigger sustained backwardation in futures spreads.

European Pricing Shake-Up: Platts Excludes Russian-Linked Fuel

From December 15, S&P Global’s Platts will stop including cargoes derived from Russian crude in its European benchmark assessments, with barge exclusions effective January 2, 2026. This structural change removes a low-cost supply segment that previously depressed margins for compliant refiners. While aligning with EU import bans, it also narrows liquidity in the refined-products market.
Traders anticipate near-term volatility in diesel cracks, which could rise $2–$4 per barrel as the market adjusts. However, broader crude prices remain constrained because these refined-product premiums are offset by weak feedstock consumption and inventory overhang in the ARA region, where diesel storage sits 12% above the five-year average.

Fuel Prices at the Pump Remain Elevated Despite Crude Decline

In the U.K., a different dynamic is fueling public frustration. While Brent has fallen from $78 to $63 per barrel, average pump prices remain near £1.37 per litre for petrol and £1.46 for diesel, almost unchanged from January. The Competition and Markets Authority (CMA) attributes this disparity partly to higher operating costs—energy, insurance, and wage inflation—rather than profiteering, though consumer groups remain skeptical.
The country’s refining base has shrunk to four operational refineries after recent closures, notably Grangemouth, leaving supply chains more dependent on imports and vulnerable to logistical premiums. The upcoming Fuel Finder scheme, launching in spring 2026, aims to improve transparency by forcing retailers to publish real-time prices.

North Sea Consolidation Reshapes European Production Landscape

Meanwhile, TotalEnergies (NYSE:TTE) is merging its U.K. upstream assets with NEO NEXT Energy, creating NEO NEXT+, the largest independent producer in the North Sea. The combined entity will control production exceeding 250,000 barrels of oil equivalent per day by 2026. This consolidation, alongside Repsol’s 23.6% stake and HitecVision’s 28.9%, underscores a shift toward efficiency in aging basins. The North Sea remains strategically relevant to European energy security, even as declining output caps its influence on Brent pricing mechanics.

Technical Picture: WTI (CL=F) and Brent (BZ=F) Remain Under Downtrend Resistance

Technically, WTI has broken below the 50-day exponential moving average (EMA) and continues to trade in a descending channel between $58 support and $62 resistance. Momentum oscillators remain bearish, with the Relative Strength Index (RSI) at 41 and the MACD line extending further negative.
For Brent (BZ=F), resistance at $65 aligns with the upper downtrend line and the 50-day EMA, while support sits at $60—a decisive psychological level. Futures positioning confirms the bearish bias: non-commercial longs fell 8% week-over-week, while net shorts increased by 14%, reflecting systematic selling from trend-following funds. Unless Brent reclaims the $66–$67 region, traders will continue fading rallies rather than initiating long exposure.

Market Structure and Volatility Metrics Indicate Bearish Sentiment

CME data shows daily volume in crude oil futures exceeding 1.3 million contracts, but open interest has stagnated. The WTI CVOL Index sits near 29.4, implying continued price swings within a narrow mean-reverting band. Calendar spreads show contango widening to $0.43 per barrel between January and March 2026, a clear sign of oversupply concerns.
Storage economics again favor holding barrels rather than drawing them, reinforcing inventory builds at Cushing and Rotterdam. Analysts project OECD crude stocks to rise by 15 million barrels in December, reversing Q3 drawdowns.

Macro and Risk Outlook: Rate Cuts vs. Recession Signals

Oil’s weakness contrasts with equity resilience, but both reflect expectations of monetary easing. The International Energy Agency (IEA) still forecasts global demand growth of 1.1 million barrels per day in 2026, but forward indicators—such as China’s industrial utilization at 73.4% and Europe’s manufacturing PMI below 49—suggest downside risk.
Conversely, potential supply disruptions from Iraq, Venezuela, or Russia’s Black Sea ports could create short-term spikes. The key determinant remains the Ukraine ceasefire trajectory: a breakthrough could depress Brent toward $60, while extended hostilities or new sanctions could send prices back above $68–$70 temporarily.

Verdict — OIL (CL=F / BZ=F): HOLD / SHORT-TERM BEARISH

The structural narrative is weak. Oversupply from non-OPEC flows, Chinese import substitution, and tepid Western demand cap upside momentum. Technical patterns confirm continued downward bias unless WTI breaks above $62.50 and Brent clears $65.50 with volume confirmation. Short-term traders can exploit range moves between $58–$63, while long-term investors should await signs of inventory tightening or confirmed OPEC+ production discipline before re-entry.
Rating: HOLD / SHORT-TERM BEARISH — WTI near-term range $58–$63, Brent $60–$65; downside extension possible to $55 if Fed recession fears deepen.

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