Benzinga·2025-12-28 18:30Core Viewpoint - Oil is expected to be one of the negative-performing assets in 2025, with significant discrepancies in performance among oil majors [1][2] Market Outlook - Major banks forecast subdued oil prices for 2026, with J.P. Morgan predicting an average of $53 per barrel and Goldman Sachs at $52, citing oversupply and slowing demand growth as key factors [3] - OPEC+ is likely to maintain output levels to defend price floors, which may limit downside risk while leaving the market vulnerable to upside shocks [6] Contrarian Opportunity - The prevailing pessimism in the oil market presents a contrarian investment opportunity, as structural constraints are tightening due to years of underinvestment and ESG pressures [5] - Discovery rates are weak, and natural decline rates of existing fields are eroding supply, suggesting potential for price increases despite bearish forecasts [5][7] Demand Dynamics - Demand destruction has been slower than anticipated, with resilient consumption in sectors like aviation and petrochemicals, and China playing a supportive role through strategic stockpiling [6] Challenges Ahead - The contrarian case for oil is not guaranteed, as factors such as a global recession, rapid electric vehicle adoption, or a breakdown in OPEC+ cohesion could lead to lower prices [8] - US shale production may respond more quickly to price signals than expected, adding to the uncertainty in timing for potential price recovery [8] Market Sentiment - The extreme bearish consensus, combined with structural underinvestment and OPEC+ supply management, suggests that oil may offer asymmetric upside in 2026, where even modest surprises could have significant effects [9]