- OPEC+ supply hikes align with strong summer demand, but analysts warn of a growing surplus in Q4 and 2026.
- Investment banks like HSBC and ING forecast a bearish turn after the summer, with oversupply risks from continued OPEC+ production hikes.
- Demand remains firm for now, driven by peak summer usage and tight inventories.
The OPEC+ group was likely betting on robust demand during the peak summer driving season when it decided to start accelerating the production hikes in May. The market proves it has been right.
At the end of the second quarter and the start of the third quarter, demand growth will not lag supply growth materially, according to analysts.
Oil Glut in Q4?
But come autumn and the fourth quarter, the market could find itself oversupplied, weighing on oil prices and market sentiment.
Analysts and major investment banks currently expect an oil glut late this year and into 2026. Most of these don’t see oil prices higher than $60-$65 per barrel in the fourth quarter of 2025 and in early 2026.
OPEC+’s latest increase of 411,000 barrels per day (bpd) for July, the third such hike in three consecutive months, suggests that the group will have brought back more than 60% of the 2.2 million bpd planned supply increases by the end of July, ING’s commodities strategists Warren Patterson and Ewa Manthey say.
“We’re also assuming that OPEC+ will continue with these large supply hikes,” the strategists added.
“This would mean that the full 2.2m b/d of supply will be brought back by the end of the third quarter of this year, 12 months ahead of schedule.”
This is ING’s base-case scenario and the key assumption behind the bank’s price forecast for Crude to average $59 per barrel in the fourth quarter.
Despite the third consecutive large increase in three months announced by OPEC+, oil prices haven’t plummeted. One reason has been geopolitics, with flare-ups in the Middle East and U.S.-Iran tensions. Another is the belief that currently the market can support higher OPEC+ supply considering the period of peak summer demand.
“It’s never usually a good idea to short the market on the eve of the seasonal increase in demand,” Frederic Lasserre, global head of market research and analysis at major international oil trader Gunvor Group, told Bloomberg.
Demand will hold for now, but uncertainties abound after the third quarter of the year.
“But after that, the consensus for the fourth quarter and 2026 is quite bearish,” Lasserre said.
HSBC, for example, has a forecast that Brent Crude prices will remain around $65 per barrel later this year. But this could be too optimistic as OPEC+ continues to raise production, which will result in a bigger-than-expected surplus after the summer ends, the bank said last week in a note by Reuters.
“Our new scenario assumes regular hikes from October to December and leaves the 2.2mbd of voluntary cuts fully unwound by the end of 2025,” the bank added.
Currently, the market is fairly balanced, and peak summer demand will support the large OPEC+ increases already announced for June and July. But the hikes after the third quarter – when peak demand season would have ended – will raise the surplus to higher than previously expected levels, HSBC said.
“Deteriorating fundamentals after summer raise downside risks to oil prices and our $65/b assumption from 4Q onwards,” the UK bank’s analysts wrote.
Goldman Sachs, however, expects OPEC+ to make its final production hike in August at the now-standard level of 411,000 bpd.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, says that crude oil prices have held since OPEC+ announced its latest production hike in early June.
“On the demand side, rising consumption of gasoline and distillates ahead of the peak summer season for driving and air conditioning has helped underpin the market,” Hansen noted.
The U.S. benchmark, WTI Crude, remains supported by strong refinery demand, low inventory levels, and the disruption to Canadian production caused by ongoing wildfires, according to the strategist.
At Cushing, Oklahoma—the delivery point for CME WTI futures—crude inventories dropped last week to a ten-year seasonal low of 23.5 million barrels, compared to a ten-year average of 35.1 million barrels, Hansen noted.
“This tightness is helping to sustain elevated time spreads at the front end of the futures curve, reflecting robust near-term demand.”
Geopolitical and Economic Uncertainties
All forecasts could go out of the window in case the U.S.-Iran tension escalates further or if major economies deteriorate significantly as a result of the U.S. trade policies.
This week, oil prices rallied on Wednesday to a seven-week high as reports emerged that the U.S. State Department is preparing to order the departure of non-essential personnel from its embassy in the Iraqi capital, Baghdad, amid escalating security risks tied to stalled nuclear negotiations with Iran.
On the economy front, the World Bank said on Tuesday that heightened trade tensions and policy uncertainty are expected to drive global growth down this year to its slowest pace since 2008 outside of outright global recessions.
As a result of President Trump’s tariff blitz, the World Bank has cut growth forecasts in nearly 70% of all economies—across all regions and income groups.
“Uncertainty fueled by President Trump’s shifting stance on tariffs has intensified fears of a global economic slowdown, leading to increased short-selling activity,” Saxo Bank’s Hansen said last week.
“Some of this bearish positioning has come from macro-focused hedge funds using oil as a proxy hedge against weakening global growth.”