As energy markets settle into the new year, crude oil finds itself at an inflection point. Brent crude closed Friday at $60.75 per barrel, while West Texas Intermediate (WTI) settled at $57.32—both hovering near four-year lows and well below levels that many producing nations need to balance their budgets.

The 2025 scorecard tells a story of persistent weakness: Brent and WTI benchmarks recorded annual losses of nearly 20%, the steepest decline since 2020 when the pandemic briefly sent crude prices into negative territory. It marked Brent's third consecutive year of losses—the longest such streak on record.

The Supply Glut Narrative

Unlike 2020's demand-driven collapse, today's price weakness stems primarily from concerns about oversupply. Global production continues to exceed consumption, building inventories that weigh on prices despite OPEC+'s best efforts to manage output.

Forecasts for 2026 offer little comfort. The International Energy Agency projects a surplus of 3.84 million barrels per day, while Goldman Sachs estimates a more modest but still bearish 2 million bpd oversupply. The U.S. Energy Information Administration expects Brent to average $55 per barrel in the first quarter of 2026—below current levels—and remain near that price throughout the year.

Non-OPEC production, particularly from the United States, Brazil, and Guyana, continues to grow. American shale producers have proven remarkably resilient at current prices, maintaining output levels that many assumed would require $70+ crude to sustain.

The January 4 OPEC+ Meeting

Against this backdrop, the OPEC+ coalition will convene virtually on Sunday, January 4, in what could be one of its most consequential gatherings since the pandemic. The group—comprising OPEC members plus allied producers led by Russia—must decide whether to extend current production cuts into the second quarter or begin unwinding them as originally planned.

The prevailing expectation is that eight key producers—Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman—will confirm output will remain steady through at least March 2026. In November, the group announced it would "pause production increments in January, February, and March 2026 due to seasonality."

But holding the line may not be enough. With prices already depressed and forecasters projecting surplus conditions, simply maintaining current production levels won't solve OPEC+'s fundamental challenge.

Saudi-UAE Tensions Add Uncertainty

Complicating matters further, a public dispute between two of OPEC's most important members—Saudi Arabia and the United Arab Emirates—has intensified in recent weeks. The crisis, rooted in competing interests over Yemen, has led to halted flights at Aden's airport and raised questions about the coalition's cohesion.

Despite the diplomatic tensions, analysts expect both nations to set aside their differences for Sunday's meeting. Neither can afford a price war in the current environment, and the shared interest in higher oil prices should override geopolitical friction—at least temporarily.

"OPEC+ is expected to confirm that it would hold output steady through the first quarter of 2026. The question is whether the market believes they can maintain discipline as prices test their resolve."

— Energy analyst consensus

Geopolitical Wildcards

While supply dynamics dominate the current narrative, geopolitical risks haven't disappeared. Several flashpoints could rapidly shift market sentiment:

  • Venezuela sanctions: The U.S. has stepped up pressure on Venezuela's energy sector, targeting Chinese and Hong Kong-based firms allegedly involved in bypassing export restrictions
  • Russia-Ukraine conflict: Reciprocal strikes over the New Year hit Black Sea port facilities and damaged key energy infrastructure
  • Middle East tensions: The ongoing Israel-Iran rivalry continues to create headline risk for Gulf crude flows

So far, these risks have been insufficient to offset supply concerns. But a major escalation—particularly involving Iranian production or Strait of Hormuz shipping—could quickly reverse the bearish tide.

What Lower Oil Means for Consumers

For American drivers, weak crude prices have delivered tangible relief. The national average gasoline price has fallen to $2.83 per gallon, the lowest since 2020. Diesel prices have declined similarly, reducing costs for trucking and logistics that eventually flow through to consumer goods.

Lower energy costs also help contain inflation, giving the Federal Reserve more flexibility on interest rate policy. Energy prices were a key driver of the 2022 inflation spike; their current moderation is a significant tailwind for the broader economy.

Investment Implications

Energy stocks were among 2025's worst performers, and the sector enters 2026 with beaten-down valuations. Major integrated oil companies like ExxonMobil and Chevron now trade at single-digit price-to-earnings ratios, offering dividend yields that exceed Treasury bonds.

For contrarian investors, the setup may be attractive. Oil markets are notoriously cyclical, and current pessimism could create opportunities if supply disruptions or stronger-than-expected demand shift the balance. However, the structural transition toward renewable energy remains a headwind for long-term oil demand growth.

Watching Sunday's Meeting

The January 4 OPEC+ gathering will set the tone for energy markets in early 2026. While the baseline expectation is for continued output restraint, any signals of wavering discipline—or deeper cuts—could move prices significantly.

For now, oil bulls must hope that either OPEC+ surprises with aggressive action or geopolitical events provide the supply shock that fundamentals alone cannot deliver. Without one or the other, sub-$60 crude may become the new normal for the year ahead.