Oil Price Forecast - Oil Prices Hover at $57 WTI and $62 Brent While Venezuela Risk Builds

Oil Market Overview: WTI CL=F and Brent BZ=F Around $58–$62

WTI crude futures CL=F trade around $57–$58, while Brent BZ=F holds near $61–$62. Screens show softness, but the physical grid is tighter than the price band suggests. Louisiana Light trades near $59.40, Mars US around $70, and the OPEC basket is close to $61, signalling that key physical blends are not pricing a collapse. The front end reflects oversupply optics and sentiment, not a structural demand breakdown.

Price Structure: $55 WTI Support Versus 50-Day EMA and Downtrend

The recent low near $55 in WTI CL=F matches a major support zone that held in late spring. From that base, crude bounced into a confluence of the 50-day EMA and a descending trend line, where rallies have repeatedly failed. The latest move higher is driven largely by short covering into thin holiday liquidity rather than a fundamental shift. Brent mirrors the pattern, with support at roughly $58 and a recovery into the same type of dynamic resistance. Until price can close decisively above the 50-day EMA and break the downtrend, the chart still labels this market as corrective inside a broader weak phase.

Extreme COT Positioning: Specs Max Short, Commercials Max Long

Futures positioning in WTI CL=F is stretched to historical extremes. Speculators sit around the 97th percentile of net short exposure, more than two standard deviations away from normal ranges. Commercial hedgers, the “physical side”, are near 96% of their all-time long band. Directional divergence between concentrated longs and shorts is roughly 2.5%, a level not seen since mid-2017 when it hit about 2.7%. That 2017 signal coincided with a major trough and a rally of roughly 49%, adding around $35 over about 469 days. After the 2020 negative price event, crude rallied more than 500% in under two years. Even in 2024, a flush towards $49 was followed by a roughly 52% rebound in about 75 days. The lesson is simple: when both sides are this deep, any decisive upside break can trigger a violent short squeeze. At the same time, if bears keep control, the final leg lower can be sharp. Price confirmation is still missing, but the asymmetry is clear: shorts have far more to lose on a fast reversal than longs do on one more test of the lows.

Demand Reality: Energy Transition Narrative Cracks While Consumption Stays Firm

The political narrative priced the “end of oil”; the real economy never did. Aggressive Net Zero promises, 2035 internal combustion bans, and ESG marketing pushed investors to assume a steep decline in oil demand. The result was chronic underinvestment in upstream capacity while actual consumption remained sticky. Air travel resumed, e-commerce grew, industrial activity persisted, and emerging markets never signed up for voluntary de-growth. Today the political pendulum is swinging back. The EU is already diluting outright engine bans into stringent emission targets instead of hard prohibitions. Many ESG products that absorbed huge inflows are now sitting with sustained underperformance versus broad benchmarks. This shift acknowledges reality: global oil demand is not collapsing; the floor is materially higher than the “end of oil” rhetoric implied. That gap between hype and usage is one of the key supports under WTI CL=F in the $50s and BZ=F in the low $60s.

Supply Constraints: Shale Discipline, Flat Capex and Slow Technology Adoption

On the supply side, the market is still digesting a decade of underinvestment. U.S. shale producers, especially smaller operators below 10,000 b/d, are already trimming costs and holding capital spending flat or slightly lower going into 2026. The easy productivity gains that drove the first shale waves are largely exhausted. Breakeven levels are not collapsing the way bullish efficiency narratives promised. AI is not going to slash drilling costs for WTI CL=F in any dramatic way. The real AI upside is in optimizing midstream flows, maintenance and production scheduling, not in cheaply unlocking vast new reserves. Lightweight proppant can genuinely extend shale well life and slow decline rates, but survey data indicate that only about 15% of firms plan to deploy it in 2026. That low adoption rate means there is no imminent “Shale 4.0” volume surge. Collectively, conservative capex and slow technology penetration cap forward supply growth and argue for a tighter underlying balance than spot prices suggest.

Inventory Picture: Crude Draws Versus Product Builds and the “Glut” Optics

Recent EIA data create a split picture. Crude inventories are drawing, which would normally support WTI CL=F, but gasoline and distillate stocks have risen sharply. Demand down the barrel appears weak, and refiners show no urgency in ramping crude runs. This is the backbone of the current “glut” view: refiners comfortable, product tanks reasonably full, and end-user consumption unimpressive. With that backdrop, every bounce into resistance is treated as an opportunity to re-establish shorts. As long as product stocks remain elevated and demand signals fail to firm, bearish traders can justify pressing rallies, keeping the front of the curve under pressure even while structural tightness builds underneath.

Venezuelan Heavy Sour Risk: Up to 500,000 b/d at Stake

The most acute tail risk sits in heavy sour crude. Around 75 tankers are idling off Venezuela, with roughly half on the U.S. sanctions list and about 11 million barrels of oil and fuel effectively stranded. U.S. authorities have escalated enforcement by boarding multiple tankers and threatening a broader blockade of sanctioned oil flows to and from Venezuelan ports. If storage fills, PDVSA has no choice but to shut in wells. A worst-case scenario puts around 500,000 barrels per day at risk. This is not generic light sweet crude; it is heavy, sour feedstock for complex refineries built to turn it into diesel and jet fuel. Suitable substitutes are limited to producers like Canada, Mexico and Russia. Removing that volume stresses specific refining systems and middle distillate markets disproportionately.

Shadow Fleet Exposure: Structural Risk to Sanctioned Barrels Beyond Venezuela

The Venezuelan disruption is not isolated. The same “shadow fleet” that moves Venezuelan crude also carries sanctioned Russian and Iranian barrels. Seizing those tankers or simply making them higher-risk assets raises freight costs and disrupts routing across all sanctioned flows. That adds friction to an already fragmented seaborne market. Even if headline WTI CL=F and BZ=F prices take time to respond, structural transport risk tightens the effective availability of certain grades. For refiners relying on heavy sour crude, the cost of ensuring supply security rises, and over time that feeds into crack spreads and product pricing. The current $57–$62 band does not fully reflect this latent structural risk.

Gas, LNG and Nuclear: Rebalancing the Energy Mix Without Killing Oil

Natural gas, LNG and nuclear policy are reshaping the competitive landscape but not eliminating oil. U.S. natural gas trades above $4.15 with daily gains near 5%, supported by robust LNG flows. Russia has doubled LNG deliveries to China year-over-year in November to about 1.6 million tonnes, at roughly a 10% discount to an average import price near $9.85 per MMBtu. China’s overall LNG imports are down around 16% to roughly 66 million tonnes, yet Russian volumes gained share, squeezing higher-cost suppliers like Australia. Australia, in turn, is preparing domestic allocation rules from 2027 that will force 15–25% of LNG output to remain at home, tightening seaborne gas availability. Parallel to that, Japan is restarting the Kashiwazaki-Kariwa nuclear plant, bringing about 1.4 GW back online after a 15-year shutdown. These moves shift some marginal power and heating demand away from oil and gas, but they also introduce new rigidities and regional imbalances. Oil remains the flexible backstop for transport and for systems that cannot pivot quickly. Net impact: more complexity, not a simple linear demand decline for WTI CL=F and BZ=F.

Cross-Asset Signal: Gold at $4,497 and Copper at 11,996 Versus “Cheap” Crude

Other commodities are sending a very different message than oil futures. Gold has surged to about $4,497 per ounce, up more than 70% since early January, pricing in escalating geopolitical risk and expectations of rate cuts into 2026. Copper’s three-month LME contract has printed around 11,996 after key supply deals at zero processing fees underscored severe tightness in the system. Those prices say the world is structurally short real assets and long nominal promises. Against that backdrop, WTI CL=F near $57–$58 and BZ=F around $62 look discounted. If gold is correctly pricing geopolitical and monetary risk and copper is correctly pricing long-cycle supply constraints, then crude at current levels is underpricing both security-of-supply risk and medium-term demand for transport and petrochemical feedstock.

Policy Regime Change: From ESG Hype to Energy Security and Affordability

Energy policy is in regime shift. From 2020 onward, politics and capital chased aggressive ESG targets, engine bans and Net Zero deadlines. Capital was directed toward low-return green projects while traditional energy was starved. Many of those ESG vehicles are now in a “post-greenwashing” phase, with weak performance and credibility damage. As inflation, energy cost spikes and geopolitical risk accumulated, voters and governments pivoted toward security and affordability. The EU softening its 2035 engine bans into tough emission standards is one example; the willingness of the U.S. administration to deploy naval power in Venezuela while still selectively licensing flows to the U.S. Gulf Coast is another. The new regime rewards resilient, reliable supply. That backdrop is positive for upstream and midstream economics and is not captured by WTI CL=F in the high 50s.

Short-Term Trading Playbook: Fade Rips Into 59–60, Respect 55 Support

Tactically, the market is still in a weak trend with powerful short-covering bursts. The bounce off $55 in WTI CL=F has carried price into the 50-day EMA and a clear descending trend line. Product stocks are heavy and fundamental news flow is not yet bullish enough to justify a trend reversal. In this context, strength toward $59–$60 in WTI CL=F and $63–$64 in BZ=F is likely to be met with selling once full liquidity returns. Short sellers who missed the initial move will use those zones to initiate or add. On the downside, $55 remains the critical pivot. A daily close below $55 opens room toward $52–$50, but with COT positioning already extreme, the risk of a sharp intraday reversal increases as you move lower. Short-term traders should treat rallies into resistance as tactical short opportunities and panic moves below $55 as higher-risk for new shorts and better entry points for patient longs.

Medium-Term Stance on WTI CL=F and Brent BZ=F: Buy Dips, Not Rips

On a 12–24 month horizon, the balance of evidence is skewed bullish for crude. WTI CL=F trades near $57–$58 with a proven support zone around $55 and a COT structure that places specs near record shorts and commercials near record longs. Years of underinvestment, flat shale capex, slow adoption of productivity-enhancing technology and rising geopolitical risk in heavy sour supply all point to a tighter market than the strip reflects. Venezuelan disruptions, shadow fleet seizures, and structural risk to sanctioned barrels introduce asymmetric upside risk for WTI CL=F and BZ=F. Simultaneously, gold above $4,000 and copper near 12,000 tell you that the market is willing to pay for real assets in an unstable macro regime. Medium term, the strategy is clear: treat the $55 zone in WTI CL=F as an accumulation area, add on forced liquidations or spikes below that level, avoid chasing breakouts above $60–$62 unless positioning has normalized and product stocks turn, and frame crude as a buy-rated asset with volatility, not a structurally broken commodity.

That's TradingNEWS