2025-11-03
Oil Price Nudges Upwards
The global oil price has not followed the surge upwards seen in other commodities, and even tighter sanctions on two Russian producers caused only a modest rise. Will that change in 2026?
Prices of gold, rare earth metals and other commodities have risen sharply in an age of high government debt and reduced long-term value of paper currency. So the failure of the world price of oil to rise in tandem is worthy of note.
By October, Brent crude has traded in the range of $60-$75 for most of the year. It spiked upwards after October 22, when US President Donald Trump announced sanctions on two large Russian crude producers, Rosneft and Lukoil and 34 subsidiaries, in order to apply pressure on the Putin regime to end the conflict in Ukraine. This was supported by secondary sanctions. The two companies between them produce 5mn barrels per day, around half of Russian production.
By the end of that week, Brent crude was trading at $66, up from around $60 at the beginning of October, but well below its highest price in January, when it peaked at around $80.
Since April, Opec+ – the Organisation of the Petroleum Exporting Countries plus allies including Russia – began output increases. It is likely that Saudi Arabia has come under pressure from the Trump administration to increase capacity, and one motive for it to do so is to increase market share.
In August, the International Energy Agency (IEA) stated that Opec+ spare capacity was around 4.1mn barrels per day, almost all of which was held by Saudi Arabia and the United Arab Emirates. Shortly after the announcement of sanctions against Rosneft and Lukoil, it forecast oversupply of 3.2mn barrels a day between October 2025 and June 2026. During the Biden administration, the price averaged around $80.
Following the invasion of Ukraine in February 2022, western nations did not impose tight sanctions on Russian oil and imposed a price cap instead, to prevent a price surge which would have increased inflation and could have caused Russian earnings to rise with lower volumes at higher prices.
Since mid-2025, President Trump has urged India to reduce imports of oil from Russia as he has sought to exert pressure on President Putin in the peace talks. He increased tariffs on India to 50% in August. Secondary sanctions following his announcement on October 22 are likely to affect India and China considerably.
Any banks processing payments to the two Russian companies face being cut off from the US financial system. Major oil companies risk losing access to western insurance and shipping services. Refineries in both India and China have announced that they will suspend imports of Russian oil. In addition, the European Union and the United Kingdom have imposed sanctions on the shadow fleet transporting Russian crude oil.
India has been importing between 1.5-2mn barrels a day from Russia, so a comprehensive switch to sourcing elsewhere could cause a price surge, depending on supply levels elsewhere. The price cap has helped Indian refineries boost their margins, as they have been able to import cheap Russian crude oil and sell refined products at market prices.
There are routes to evade sanctions. Some refineries in India and China import Russian oil via third or fourth-party intermediaries, not directly affected by sanctions. Supplies via pipelines are more difficult to detect compared with ship cargoes.
So the outlook for the oil price is moderately higher for now, with an uncertain future.
Prices of gold, rare earth metals and other commodities have risen sharply in an age of high government debt and reduced long-term value of paper currency. So the failure of the world price of oil to rise in tandem is worthy of note.
By October, Brent crude has traded in the range of $60-$75 for most of the year. It spiked upwards after October 22, when US President Donald Trump announced sanctions on two large Russian crude producers, Rosneft and Lukoil and 34 subsidiaries, in order to apply pressure on the Putin regime to end the conflict in Ukraine. This was supported by secondary sanctions. The two companies between them produce 5mn barrels per day, around half of Russian production.
By the end of that week, Brent crude was trading at $66, up from around $60 at the beginning of October, but well below its highest price in January, when it peaked at around $80.
Since April, Opec+ – the Organisation of the Petroleum Exporting Countries plus allies including Russia – began output increases. It is likely that Saudi Arabia has come under pressure from the Trump administration to increase capacity, and one motive for it to do so is to increase market share.
In August, the International Energy Agency (IEA) stated that Opec+ spare capacity was around 4.1mn barrels per day, almost all of which was held by Saudi Arabia and the United Arab Emirates. Shortly after the announcement of sanctions against Rosneft and Lukoil, it forecast oversupply of 3.2mn barrels a day between October 2025 and June 2026. During the Biden administration, the price averaged around $80.
Following the invasion of Ukraine in February 2022, western nations did not impose tight sanctions on Russian oil and imposed a price cap instead, to prevent a price surge which would have increased inflation and could have caused Russian earnings to rise with lower volumes at higher prices.
Since mid-2025, President Trump has urged India to reduce imports of oil from Russia as he has sought to exert pressure on President Putin in the peace talks. He increased tariffs on India to 50% in August. Secondary sanctions following his announcement on October 22 are likely to affect India and China considerably.
Any banks processing payments to the two Russian companies face being cut off from the US financial system. Major oil companies risk losing access to western insurance and shipping services. Refineries in both India and China have announced that they will suspend imports of Russian oil. In addition, the European Union and the United Kingdom have imposed sanctions on the shadow fleet transporting Russian crude oil.
India has been importing between 1.5-2mn barrels a day from Russia, so a comprehensive switch to sourcing elsewhere could cause a price surge, depending on supply levels elsewhere. The price cap has helped Indian refineries boost their margins, as they have been able to import cheap Russian crude oil and sell refined products at market prices.
There are routes to evade sanctions. Some refineries in India and China import Russian oil via third or fourth-party intermediaries, not directly affected by sanctions. Supplies via pipelines are more difficult to detect compared with ship cargoes.
So the outlook for the oil price is moderately higher for now, with an uncertain future.
A much tighter policing of the sanctions regime could send prices higher, but this may be a difficult policy for western nations to maintain, given the impact on domestic inflation.
Demand for oil globally is around 83mn barrels a day, up from around 81mn barrels two years ago.
Demand for oil globally is around 83mn barrels a day, up from around 81mn barrels two years ago.
The IEA has projected that the peak for oil demand may be reached by the end of this decade as renewable energy sources increase their market share.
But this projection could be significantly altered by relatively minor changes in factors such as global growth and the rate of adoption of electric vehicles.
Investment in oil extraction and refining has been held back in recent years and it may be that demand is underestimated.
Investment in oil extraction and refining has been held back in recent years and it may be that demand is underestimated.
The IEA has advised that the sector needs to boost investment as production is more dependent on shale oil, which requires constant new drilling to maintain supply.
Demand is likely to be considerable for many years to come. One factor is the scale of increased energy consumption caused by the rise in use of artificial intelligence, with major tech companies investing in huge capacity increases in data centres.
Demand is likely to be considerable for many years to come. One factor is the scale of increased energy consumption caused by the rise in use of artificial intelligence, with major tech companies investing in huge capacity increases in data centres.
A survey by the Lawrence Berkeley National Laboratory reported that electricity use by data centres in the US was projected to increase from 176 terawatt-hours (twh) in 2023 to 580 twh by 2028. Much of the increased supply will be locally provided through geothermal, solar and other sources, but there will be high demand for all energy sources.
Oil’s restraint in a world of rising prices is not a sign of stability, it’s a symptom of control. While gold and metals have surged on fears of currency debasement, oil has been kept on a political leash.
Oil’s restraint in a world of rising prices is not a sign of stability, it’s a symptom of control. While gold and metals have surged on fears of currency debasement, oil has been kept on a political leash.
Washington wants low prices to contain inflation, Riyadh wants market share, and Moscow needs cash flow more than confrontation.
The result is an uneasy balance where policy has replaced price discovery. But oil can only stay quiet for so long. If sanctions tighten further or investment continues to lag, 2026 may be the year when fundamentals break through the politics—and the market finally reclaims its voice.
The author is a Qatari banker, with many years of experience in the banking sector in senior positions.
Source: GULF TIMES