Banks Are Unanimously Bearish On Oil – Is It The Contrarian Opportunity For 2026?

Core Viewpoint - Oil is projected to be one of the negative-performing assets as it closes 2025, with significant performance discrepancies among oil majors [1][2] Group 1: Market Performance - Oil started 2025 with a rally but soon exhibited typical bear-market dynamics, characterized by consistent price declines interrupted by sharp rallies [1] - ConocoPhillips experienced a year-to-date loss of 8.3%, while Exxon Mobil achieved a gain of over 11% [1] Group 2: Future Price Forecasts - Major banks forecast subdued oil prices for 2026, with J.P. Morgan predicting an average of $53 per barrel and Goldman Sachs estimating $52 per barrel [3] - The outlook is supported by projections from Morgan Stanley, Citi, and the US Energy Information Administration, which highlight non-OPEC+ supply growth and weaker macro momentum [3] Group 3: Market Dynamics - The consensus among institutions indicates persistent oversupply and slowing demand growth, compounded by the energy transition [2] - OPEC+ has shown a willingness to delay output increases to defend price floors, which limits downside risk while leaving the market exposed to potential upside shocks [6] Group 4: Demand Factors - Demand destruction has been slower than anticipated, with resilient consumption in aviation, petrochemicals, and emerging markets [7] - China's strategic stockpiling and industrial demand continue to play a supportive role in the oil market [7] Group 5: Contrarian Opportunity - The prevailing pessimism surrounding oil presents a contrarian investment opportunity, as structural constraints are tightening due to years of underinvestment and ESG pressures [5] - Weak discovery rates and deferred long-cycle developments are contributing to a decline in supply [6]