From Scarcity to Surplus: Why Oil Is Dragging Commodity Prices Down

Scarcity dominated oil headlines for a large portion of the last ten years, including OPEC+ cuts, Middle East conflicts, and concerns about an energy shortage.  But in 2025, that narrative has subtly changed.  Oil is at the center of the predicted decline in global commodity prices for the fourth year in a row.

A ‘Spill’ In The Market

Global oil supply is expected to rise by about 3.1 million barrels per day (mb/d) in 2025 and another 2.5 mb/d in 2026, according to the International Energy Agency (IEA), bringing total output close to 109 mb/d.  However, demand growth is still quite small, averaging only a few hundred thousand barrels per day per year.

When these factors are combined, the IEA and other analysts warn of a possible market surplus of roughly 4 mb/d by 2026.  High inventories support this: both OPEC and non-OPEC regions continue to have significant storage capacity, and global oil stocks are already close to record levels.

Prices Stuck in the Mid-$60s

Price expectations have decreased as a result of supply exceeding demand.  J.P. Morgan Chase analysts predict that the average price of Brent per barrel will be roughly $66 in 2025 and $58 in 2026.  Similar predictions are made by the World Bank, which projects that Brent will drop from $68 in 2025 to $60 in 2026, a five-year low that contrasts sharply with the triple-digit prices that were observed right after Russia invaded Ukraine.

The fact that these muted predictions are made in face of significant geopolitical danger is startling.  In the past, shipping-lane interruptions, restrictions on Russian oil, and the Middle East conflict would have caused sharp price increases.  However, previous occurrences have only resulted in brief spikes, demonstrating how resilient and well-supplied the oil market has become.

How Are Other Commodities Affected?

The commodities division is significantly impacted by the oil excess.  Reduced energy costs lower production and transportation costs for a variety of industries, including agriculture and metals.  This helps to explain why the World Bank projects a 7% decline in global commodity prices in 2025 and 2026.

However, not every commodity moves at the same time.  For example, 2025 has seen a significant increase in precious metals, with gold prices rising more than 40% as a result of investor apprehension and inflation worries.  This divergence shows how "commodities" are no longer a single tale; instead of being the primary cause of inflation, oil is now a price-stable input.

Who Wins and Who Loses?

The countries that import energy are the winners in the short run.  Inflation is lessened by cheaper oil, which also frees up government funds to cut fuel subsidies or reallocate spending.  However, the situation is more challenging for nations that export oil.  Financial constraints are becoming more stringent for producers with high production costs or fiscal budgets predicated on rising oil prices.

The outlook is disputed in the long run.  As efficiency increases and the use of electric vehicles grows, the IEA and World Bank predict that oil demand will level off in the middle of the 2030s.  However, banks like Goldman Sachs continue to predict that oil demand would increase from 103.5 mb/d in 2024 to 113 mb/d by 2040 due to the expansion of petrochemicals, aviation, and energy use connected to artificial intelligence.

Today's significant investment in new supply might worsen the glut and reduce prices for years if demand peaks earlier than anticipated.  However, present complacency regarding supply issues may be misguided if demand continues to be robust.

Is Oil Just Another Commodity?

For the time being, the majority of data suggests a new normal with moderate prices, an abundant supply, and a weaker correlation between oil and inflation worldwide.  Most predictions put Brent around the $60–$70 range for the coming years, barring a significant shock.

That is significant for the larger commodities theme.  A calmer oil market changes trade balances between importers and exporters, eliminates one of the primary causes of inflation volatility, and puts pressure on oil-dependent economies to diversify more quickly.  It's possible that the days of frequent "oil scarcity scares" are coming to an end, and the new difficulty is figuring out how to deal with an abundant period.

Works Cited (MLA 8th Edition)

International Energy Agency. World Oil Market Faces Even Larger 2026 Surplus, IEA Says. Reuters, 13 Nov. 2025, https://www.reuters.com/business/energy/iea-sees-global-oil-supply-growth-driving-larger-market-glut-2025-11-13/.

J.P. Morgan Research. Oil Price Forecasts for 2025 and 2026. J.P. Morgan Insights – Global Research, 2025, https://www.jpmorgan.com/insights/global-research/commodities/oil-price-forecast.

Perkins, Robert. “Goldman Sees Oil Demand Rising Through 2040 Driven by Petchem and Jet-Fuel Growth.” S&P Global Commodity Insights, 14 Nov. 2025, https://www.spglobal.com/commodity-insights/en/news-research/latest-news/crude-oil/111425-goldman-sees-oil-demand-rising-through-2040-driven-by-petchem-jet-fuel-growth.

World Bank. Commodity Markets Outlook – October 2025. World Bank Publications, 28 Oct. 2025, https://openknowledge.worldbank.org/bitstreams/9dbf64e4-975b-4905-ab9b-dceb8f285169/download.

World Bank Blogs. “Oil Market Glut: Surging Output and Sluggish Demand Pressure Prices.” Data Blog – The World Bank, 4 Nov. 2025, https://blogs.worldbank.org/opendata/oil-market-glut-surging-output-and-sluggish-demand-pressure-pri.

World Bank. Global Economic Prospects and Commodities Data 2025. World Bank Data Portal, 2025, https://data.worldbank.org/indicator/EP.PMP.SGAS.CD.

Investing News Network. “Commodity Prices Fall as Oil Surplus Weighs on Markets.” Investing News, 5 Nov. 2025, https://investingnews.com/commodity-prices-fall-oil-surplus/.

NAGA Markets. “Oil Price Predictions 2025–2026: Will the Glut Continue?” Naga.com, 2025, https://naga.com/en/news-and-analysis/articles/oil-price-prediction.