Oil analysts say there is a supply glut — why that hasn't translated to lower prices this year

Core Viewpoint - The oil market is experiencing an unexpected price rally despite predictions of deep oversupply in 2026, driven by geopolitical shocks and stronger-than-expected demand [2][3]. Supply and Demand Dynamics - Analysts had anticipated a significant oversupply of approximately 3.7 million barrels per day (bpd) in the oil market as of January 2026, which was described as an "extraordinary oversupply" by Macquarie analysts [3]. - Oil prices have increased, with Brent crude futures rising about 15% and West Texas Intermediate (WTI) crude futures up 14% since the beginning of the year [3]. Geopolitical Factors - Sanctions imposed by the US Treasury Department on major Russian oil producers, Rosneft and Lukoil, have removed around 600,000 bpd from the market [6]. - Exports from the CPC pipeline have decreased by approximately 440,000 bpd, reaching the lowest levels in seven years due to drone strikes at the Black Sea-side terminal [6]. - The potential for military action by the US against Iran has heightened concerns over disruptions in the Strait of Hormuz, a critical chokepoint for about 20 million bpd of petroleum products [7]. Market Reactions - Despite expectations of declining global demand for hydrocarbons as the world shifts towards electrification and green energy, oil prices have risen due to unexpected supply constraints and increased demand forecasts [5][4].