Commodities The Oil Manual – Chartbook: >200 Charts that Decode the Oil Market 19 Jan 2026 January 19, 2026 05:00 PM GMT M O R G A N S T A N L E Y R E S E A R C H Global RESEARCH Commodity Strategist charlotte.firkins@morganstanley.com +44 20 7425 3866 Morgan Stanley & Co. International plc+ Amy Gower Commodity Strategist amy.gower1@morganstanley.com +44 20 7677 6937 Source: Shutterstock Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors sh ...

Crude futures give back gains made in the wake of the ouster of Venezuelan President Nicolas Maduro by the U.S., settling below their pre-weekend levels.If the U.S. were to lift sanctions on Venezuelan oil it could release barrels "and only add to the surplus that the market is already experiencing," says Mizuho's Robert Yawger.A substantial increase in Venezuelan production is widely expected to be a long-term prospect, although from around 1 million barrels a day at present "Venezuela could get to 1.5 mil ...

February WTI crude oil (CLG26) on Tuesday closed down -1.19 (-2.04%), and February RBOB gasoline (RBG26) closed down -0.0194 (-1.13%). Crude oil and gasoline prices gave up an early advance on Tuesday and sold off sharply as the dollar strengthened.  Crude prices also retreated amid concerns about energy demand, after Saudi Arabia cut the price of its Arab Light crude for February delivery to customers for a third month. More News from Barchart Weakness in the crude crack spread is negative for oil p ...

Core Insights - Oil markets are projected to face a persistent oversupply in 2026, with forecasts indicating Brent and WTI prices may fall below $60 per barrel due to rising inventories and weaker demand growth [1][3][4] - Large-cap energy companies with diversified operations and strong financial models are positioned to provide stability and consistent dividends in this challenging environment [2][5][6] Oil Market Outlook - Global crude supply is expected to outpace demand growth, leading to increased inventories throughout 2026 [3][4] - Brent crude is forecasted to average around $55 per barrel, while WTI is expected to be just over $50 per barrel as the surplus deepens [3][4] Investment Opportunities - Income-focused investors should prioritize companies with durable dividends, as large-cap energy firms can offer predictable cash flow despite commodity price declines [5][6] - Canadian Natural Resources, Chevron, and Kinder Morgan are highlighted for their high dividend yields and robust business models [10][12][14] Company Profiles - **Canadian Natural Resources (CNQ)**: Offers a 5.1% yield supported by a diverse asset base and a 25-year history of dividend increases, with a strong balance sheet and operational efficiency [7][8][10] - **Chevron (CVX)**: Provides a 4.5% yield backed by a century of stability and a diversified global integrated model, maintaining or raising dividends for 90 years [11][12][10] - **Kinder Morgan (KMI)**: Features a 4.4% yield driven by contracted cash flows from its extensive energy infrastructure network, with expectations for continued dividend growth [13][14][10] Comparative Analysis - Each of the discussed companies offers a unique combination of yield, stability, and operational focus, allowing investors to align their choices with long-term income objectives [17][18]

Core Insights - OPEC+ is facing a significant shift in the oil market dynamics, with independent forecasts indicating a potential surplus of 2.1–4 million barrels per day by early 2026, leading to a "strategic pause" in production cuts to stabilize prices [2][3][24] OPEC+ Market Influence - Historically, OPEC's power stemmed from its ability to control spare capacity to influence prices, but this leverage has been diluted due to increasing non-OPEC+ supply [4][20] - The current oil market is characterized by significant contributions from non-OPEC+ producers, particularly the U.S., Brazil, and Guyana, which are adding production at a pace that offsets OPEC+ efforts [5][12] Production and Price Dynamics - OPEC+ has opted to maintain production quotas rather than implement deeper cuts, reflecting a cautious approach to avoid losing market share to competitors [7][19] - The low-$60s range for Brent crude has become an informal price floor, but bearish sentiment is growing, with projections indicating West Texas Intermediate (WTI) could average around $59 in 2026 [8][21] Fiscal Pressures on OPEC+ Members - Saudi Arabia's fiscal breakeven oil price for 2025 is estimated at approximately $91 per barrel, highlighting the financial strain on OPEC+ members as Brent prices linger near $60 [10][24] - The longer Brent remains low, the more budgetary pressure builds across OPEC+, leading to increased reliance on borrowing and reserve drawdowns [10][24] Non-OPEC+ Supply Growth - Non-OPEC+ supply growth is now a defining structural force in the oil market, with U.S. shale and other producers capable of sustaining output even during price downturns [12][13] - The rise of Brazil's pre-salt fields and Guyana's rapid production increase exemplifies the structural, long-life, low-cost additions to global supply that are largely unaffected by OPEC+ coordination [13][14] Market Sentiment and Investor Behavior - Energy equity markets are reflecting caution, with integrated oil majors prioritizing shareholder returns over production growth, indicating a shift towards cash flow extraction rather than aggressive reinvestment [17][18] - The strategic pause by OPEC+ can be interpreted as either a disciplined approach to avoid a price collapse or a sign of paralysis in responding to market changes [19][24] Future Market Outlook - The oil market is entering a new phase characterized by persistent supply growth outside OPEC+'s control, necessitating a recalibration of investor expectations [25][26] - Surpluses are becoming the baseline risk, with cash flow reliability taking precedence over reserve growth, indicating a shift in the balance of power in global oil away from OPEC+ [26]

Core Viewpoint - The company issued a statement to clarify misrepresentations in media regarding its monthly market report, specifically denying claims of a projected surplus in the oil market for 2025 and 2026 [1][2][3]. Market Report Clarification - The report does not indicate any surplus in 2026 and does not preempt any ministerial decisions that are necessary for market balance [3][4]. - The company emphasized that the report is transparent and has been issued monthly for years, and the narrative created by some media is inaccurate [2][4]. Demand and Supply Projections - The company projects robust global economic growth at around 3.1% and steady oil demand growth of approximately 1.3 million barrels per day for this year [6][9]. - For 2026, the demand is expected to remain similar at around 1.3 million barrels per day, while non-OPEC supply is projected to decline to around 6 million barrels per day growth [9][11]. Divergence in Forecasts - There is a notable divergence of about 1.8 million barrels per day between the company's forecasts and those of the IEA and EIA, the widest seen in over two decades [12][14]. - The company believes that different assumptions and modeling lead to these discrepancies, with the IEA historically being more bearish [13][15]. Long-term Demand Resilience - The company asserts that the resilience of oil demand has been underestimated, highlighting its essential role in daily life and the global economy [16][17]. - Recent reports from the IEA have aligned more closely with the company's outlook, indicating a potential shift in understanding of oil demand dynamics [17][18]. Market Conditions - Current refinery margins are at record highs, indicating strong demand and tight refining capacity [21][22]. - The market remains in backwardation, which typically suggests a tight supply situation, contradicting narratives of oversupply [23][26].

Group 1: Crude Oil Market Dynamics - Crude oil prices are supported by geopolitical risks, including tensions with Russia, Iran's seizure of an oil tanker, and US military buildup regarding Venezuela [2] - Reduced crude exports from Russia due to Ukrainian attacks on refineries have limited Russia's export capabilities, with total seaborne fuel shipments dropping to 3.45 million bpd, the lowest in two months [3] - OPEC revised its Q3 global oil market estimates from a deficit to a surplus, now projecting a surplus of 500,000 bpd, influenced by increased US production and OPEC's own output [4] Group 2: OPEC+ Production Decisions - OPEC+ announced a production increase of 137,000 bpd for December but plans to pause further hikes in Q1-2026 due to an emerging global oil surplus [5] - OPEC's October crude production rose to 29.07 million bpd, the highest level in 2.5 years, as the group aims to restore a total of 2.2 million bpd cut earlier [5] - The IEA forecasts a record global oil surplus of 4.0 million bpd for 2026, indicating ongoing challenges in balancing supply and demand [5]

Group 1 - The oil market is increasingly unbalanced with global inventories continuing to rise [1] - A larger surplus in the oil market is expected this year according to the Paris-based organization [1]

Core Viewpoint - The Organization of the Petroleum Exporting Countries (OPEC) and its allies surprised the market by not increasing production as expected for December [1] Group 1: OPEC Meeting Outcomes - The cartel was anticipated to raise production levels for December, but instead, they maintained current output levels [1] - This decision indicates a strategic approach to manage oil prices amid fluctuating demand and geopolitical factors [1] Group 2: Market Implications - The unexpected decision by OPEC may lead to tighter oil supply in the market, potentially driving prices higher in the short term [1] - Analysts will closely monitor the impact of this decision on global oil prices and the broader energy market [1]

Core Insights - The US has imposed sanctions on Russia's largest oil companies, Rosneft and Lukoil, leading to a significant increase in oil prices, with Brent crude rising over 5% to nearly $66 a barrel [1][3] - The sanctions are part of a broader strategy to exert pressure on Moscow, coinciding with a new package of EU sanctions targeting Russia's energy infrastructure [3] - Concerns are growing that India, a key buyer of Russian oil, may reduce its purchases, which could create a supply gap that China might need to fill [2][5] Group 1: Sanctions Impact - The latest US sanctions represent a significant escalation in efforts to pressure Russia, raising the risk of major disruptions to Russian crude production and exports [3] - The European Union has also intensified pressure on Russia with a full transaction ban on Rosneft and Gazprom Neft, contributing to rising prices in European diesel and US gasoline futures [3] Group 2: Market Dynamics - Despite the sanctions, global oil supply appears plentiful, with the International Energy Agency predicting a surplus of nearly 4 million barrels per day next year [4] - The oil market is currently showing signs of surplus, with record amounts of oil on tankers at sea, which may cushion the impact of the sanctions [4] Group 3: Regional Implications - India imports over a third of its oil from Russia, and rearranging these imports would be a significant challenge [5] - China's oil industry, which relies on Russian crude for up to 20% of its imports, is also feeling the effects of the sanctions [5][6] Group 4: Russia's Resilience - Russia has a history of circumventing sanctions, and its seaborne crude shipments recently reached a 29-month high despite ongoing restrictions [6] - The Rosneft-backed Indian refiner Nayara Energy may continue to serve as an outlet for Russian oil, indicating that the ultimate impact of the sanctions remains uncertain [6]