Global oil prices have fallen to their lowest levels in four years, driven by mounting optimism over Ukraine-Russia peace negotiations. Traders are increasingly concerned about a looming oversupply, with forecasts suggesting crude could plunge into the $30s per barrel by 2027.
Brent crude traded around £47.36 ($62.81) per barrel on Wednesday, while West Texas Intermediate (WTI) hovered near £43.73 ($58). Both benchmarks have declined more than 14% year-to-date, as markets factor in potential sanctions relief for Russian energy exports and an expanding global supply surplus.
Peace Talks Increase Market Pressure
Recent developments indicate a significant shift in geopolitical relations. Following talks in Geneva over the weekend, the US and Ukraine released a joint statement describing the discussions as 'highly productive' and unveiling an 'updated and refined peace framework.' Ukrainian President Volodymyr Zelenskiy expressed willingness to move forward with the US-backed plan, with only minor disagreements remaining.
Meanwhile, Russian President Vladimir Putin indicated last Friday that the Trump administration's proposal could serve as a basis for a final settlement. Moscow warned it would advance further into Ukrainian territory if Kyiv refused to negotiate. These comments have triggered sharp declines in oil markets, as traders anticipate that any easing of Western sanctions could unleash a flood of Russian barrels into an already oversupplied market.
JP Morgan Sees Oil in the $30s by 2027
JP Morgan forecasts that Brent crude could fall into the $30s per barrel by 2027, citing a potential market oversupply. The investment bank posted this forecast on social media on 24 November, warning of an 'unprecedented oil glut' if current trends continue.
Goldman Sachs has also projected WTI crude will average around £40 ($53) per barrel in 2026, amid a surplus of approximately 2 million barrels per day. If WTI prices drop to the £22-£26.40 ($30–$35) range, US petrol prices could fall to roughly £0.45-£0.60 ($0.60–$0.80) per litre — based on the industry standard that crude accounts for about 67% of pump prices.
Currently, US petrol prices average £2.31 ($3.06) per gallon, or about £0.61 ($0.81) per litre. A decline in oil to £22.62 ($30) could slash petrol prices by 25-40%.
Record Supply Outpaces Demand
The global supply side is already overwhelmed. OPEC+ has increased output targets by approximately 2.9 million barrels per day since April — about 2.7% of global supply — despite demand remaining sluggish. The International Energy Agency (IEA) reports that global oil demand grew by around 790,000 barrels per day in 2025, with similar modest growth expected in 2026.
US crude production hit a record 13.8 million barrels per day in August, according to the US Energy Information Administration (EIA). Analysts estimate global production has risen by over 6 million barrels per day since January, driven by increases from OPEC+, US shale producers, Brazil, and Guyana.
Daan Struyven, a Goldman Sachs analyst, told CNBC that the surplus next year will average about 2 million barrels per day. However, he noted that 2026 will be 'the last big oil supply wave the market has to work through,' with expectations of rebalancing in 2027.
OPEC+ Holds Back on Output
OPEC+ is scheduled to meet on 30 November. Earlier this month, the alliance agreed to pause further output hikes in January, February, and March 2026, citing concerns about a potential supply glut during the typically weaker demand quarter.
Market Awaits Russia's Response
While Ukraine has shown willingness to engage with the US peace framework, Russia has yet to formally confirm its stance. The Trump administration has dispatched special envoy Steve Witkoff to Moscow next week for talks with Russian officials.
Oil analyst Haris Khurshid, CIO at Karobaar Capital, warned that 'a Ukraine-Russia peace deal only matters if it shows up in real barrels.' He added, 'The market needs pipes, ships, and contracts — a handshake deal just won't cut it.'
With ongoing geopolitical developments and record supply levels, the outlook for oil prices remains highly uncertain. If peace negotiations succeed and supply surges further, market analysts warn of a prolonged period of oversupply and declining prices, which could drastically reduce petrol costs for consumers worldwide.
