Global oil markets opened 2026 with a cautious rebound after suffering their sharpest annual collapse since the pandemic, as Brent and US crude both moved higher following months of heavy selling driven by oversupply, trade wars and geopolitical instability. Brent crude climbed to $61.20 a barrel while US benchmark WTI rose to $57.76 in early trading on Friday, marking a break from the near-20% slide recorded during 2025, which was the worst annual fall since 2020 — The The WP Times editorial desk reports, citing Reuters.
The rebound comes after energy markets were pushed to their lowest levels in years by a surge in US output, weakening demand growth in Europe and Asia, and the return of tariff-driven trade disputes under President Donald Trump, which dampened global industrial activity and shipping volumes.
Why oil collapsed in 2025
During 2025, oil prices fell by almost one-fifth, a scale of decline not seen since the Covid shock. The slide was driven by three structural forces:
• A global supply glut, led by record US production
• Slowing demand, particularly from Europe and parts of Asia
• Geopolitical and trade tensions, which reduced cross-border trade and fuel consumption
Despite ongoing conflicts in Ukraine and the Middle East, physical oil markets were dominated by excess supply, leaving traders focused on inventories rather than risk. By late December, however, prices stopped falling as several supply-side threats emerged simultaneously.
What changed at the end of the year
In the final week of December, oil markets abruptly shifted from oversupply anxiety to supply-risk pricing as a series of geopolitical and logistical threats re-entered the equation. Tensions in the Middle East once again raised concerns over the security of key shipping corridors through the Red Sea and the Strait of Hormuz, where even minor disruptions can remove millions of barrels a day from global supply. At the same time, Venezuela signalled potential export interruptions as political and infrastructure pressures intensified, threatening one of the world’s largest pools of heavy crude.
Meanwhile, the collapse of Russia-Ukraine peace talks reinforced expectations that Western sanctions on Russian energy exports will remain in place well into 2026, restricting flows into European and global markets. Together, these developments restored a geopolitical risk premium that had largely disappeared during most of 2025, when traders were focused almost exclusively on surplus production and weak demand.
At the same time, China accelerated purchases of crude oil for its strategic reserves, locking in supplies at low prices and placing a firm floor under global demand just as inventories in the US and Europe began to tighten.
OPEC+ and the next price signal
Markets are focused on the OPEC+ meeting on 4 January, which will set the first coordinated supply policy for global oil markets in 2026. The alliance of major oil-exporting countries currently operates under a system of output targets and voluntary production limits introduced in 2025 after prices fell to their lowest levels since the pandemic.
Under this framework, member states such as Saudi Arabia, Russia, the UAE and Iraq committed to holding back millions of barrels per day from the market in order to slow the build-up of global inventories. The January meeting will review whether these restrictions remain appropriate given current demand, stock levels and price conditions.
At the same time, official data show that US crude oil production remains at record levels, driven mainly by shale output, while US commercial crude inventories have been falling in recent weeks. This indicates that refinery runs, exports and domestic consumption have been absorbing new supply faster than it is being added.
China has also increased its role in the physical market. Data from traders and customs agencies show that Chinese refiners and state stockpilers have continued buying crude oil, both for immediate use and for strategic reserves, providing a steady source of demand during the final weeks of 2025 and the start of 2026.
Together, these three forces — OPEC+ supply management, US inventory trends and Chinese import demand — form the main signals the market is using to assess whether the global oil system is moving away from surplus and towards balance.
Why this matters for Britain
For the UK, these developments are not abstract. Brent crude is the benchmark that underpins European fuel, gas and shipping contracts, meaning movements in global oil markets flow directly into:
• petrol and diesel prices
• wholesale gas and electricity costs
• airline and freight fuel charges
• transport-driven food inflation
As a result, changes in Brent affect household budgets, business costs and inflation calculations across the British economy. Oil prices remain well below the levels of previous years, but the stabilisation at the start of January marks a shift from the steep declines that dominated 2025. From this point, UK energy costs will be shaped primarily by how global producers manage supply, how secure shipping routes remain, and how strong industrial demand proves to be.
In 2026, oil once again sits at the centre of the UK cost-of-living equation, linking global energy markets directly to what British households and businesses pay at home.