Oil’s new tug-of-war: geopolitics, supply discipline, and a 2026 surplus narrative

In late February, crude pulled back as traders weighed progress toward another round of U.S.–Iran nuclear talks against rising trade-policy uncertainty, with Brent near $71 a barrel and WTI around the mid-$60s in the same session. This is happening after a January run-up that the U.S. EIA linked to weather-driven supply disruptions and elevated Iran-related tensions, even while maintaining the broader view that inventories build through the year as supply outpaces demand. The key point is that the market is pricing two timelines at once: immediate disruption risk versus a medium-term rebalancing back toward surplus.

On the supply side, OPEC+ is leaning into flexibility rather than committing to a steady ramp. The eight producers leading the voluntary adjustments reaffirmed plans to pause production increments through March 2026, explicitly citing seasonality and the option to reverse course depending on market conditions, with another review meeting set for early March. This posture matters because it limits near-term downside from oversupply, but it also signals that the group expects demand softness risks to linger, keeping policy reactive rather than mechanical.

Meanwhile, U.S. inventory data is flashing a more tight in the prompt picture. In the latest weekly figures for the week ending February 13, commercial crude inventories fell by 9.0 million barrels to 419.8 million, while refineries ran at about 91% of operable capacity and total products supplied stayed elevated, a mix consistent with firm near-term consumption and robust refining throughput. Distillate draws and below-average inventory comparisons for this time of year add another layer: parts of the barrel still look sensitive to weather and industrial activity, even if the global balance later in 2026 turns looser.

Where the story gets interesting for markets is the gap between spot volatility and forward expectations. The EIA’s February outlook still forecasts Brent averaging about $58 per barrel in 2026 and lower in 2027 on rising inventories. At the same time, major banks have been adjusting their late-2026 forecasts upward while still framing the baseline as surplus unless there are major disruptions, meaning upside is treated as event-driven, not structural. For global finance, that mix can be powerful: if oil stays choppy near-term, it can keep inflation uncertainty alive and complicate rate-cut timing; if the surplus narrative wins over the medium term, it becomes a disinflation tailwind that supports risk assets and shifts leadership away from pure energy beta toward companies with pricing power and balance-sheet resilience.