A major reversal in oil prices is coming? Barclays: The "oversupply crisis" is an illusion, a multi-year bull market for crude oil is about to begin!
According to Qifeng Trading Desk, amid the chorus of consensus that "crude oil is heading for an epic surplus," Barclays has given a distinctly contrarian view: the oversupply that the market currently fears is overestimated in scale and exaggerated in duration, and the truly important changes are set to happen after 2026.
In Barclays' view, this is not the start of a bear market for crude oil, but rather the "last emotional mispricing" before a multi-year upward cycle.
Why is the market misjudging? The “surplus narrative” itself doesn’t hold up
In the past year, the market has repeatedly cited supply-demand forecasts from the IEA and EIA, expecting a 0–4 million barrels/day surplus in global crude oil supply by 2026. But Barclays emphasizes that if the surplus were real, it should first be reflected in inventories.
However, real data do not support this view, and Barclays believes the real data do not support this view.
First, the so-called “4 million barrels/day surplus” simply hasn't happened in reality.
Both onshore commercial stocks and offshore floating storage, as well as oil in transit, are significantly lower than levels implied by these models. The price itself gives the answer—Brent hasn’t dropped into the repeatedly expected $40–50 range, but instead shows notable resilience.
Second, the issue isn’t “missing oil,” but underestimated real demand.
Barclays points out that the market isn’t “miscalculating supply,” but systematically underestimating absolute demand. Different agencies' baseline projections for 2026 oil demand differ by more than 2 million barrels/day. The so-called “missing barrels” haven’t vanished—they're obscured by statistical methodology and delayed data.
Third, refinery margins and futures structure are "voting with their feet."
Even during the seasonally weakest winter window, global refining profits remain at healthy levels, sufficient to incentivize refineries to keep running; Brent and WTI futures curves have long stayed in backwardation, typically meaning a premium is still being paid for spot supply, rather than being suppressed by surplus.
In Barclays' view, these three points lead to one conclusion: there may be some surplus in the short term, but its scale is closer to 1.5 million barrels/day and duration is very limited.
The real turning point isn’t now, but after changes in the “non-OPEC supply paradigm”
If short-term disagreements stem from misreading "inventories and demand," then Barclays' fundamental bullish logic for crude points to supply structure changes after 2026.
Over the past decade, the global oil market has had an underlying premise: once prices rise, US shale oil will quickly fill the gap. That premise is failing.
The latest EIA forecasts show US crude output will reach a record 13.6 million barrels/day in 2025, but will hardly grow further in 2026 and may even drop slightly to around 13.3 million barrels/day in 2027. This means the supply elasticity—where output instantly matches price increases—is clearly weakening.
Barclays notes that as core blocks mature, costs rise, and industry consolidates, US oil production can no longer play the role of "automatic stabilizer." By Barclays' calculations, over the next five years, US supply will likely be “flat or slightly fluctuating,” not consistently growing.
Though many new international projects exist, their pace is much slower than the market imagines. Deepwater projects in Brazil and Guyana will add new supply, but these projects have clear "startup–ramp up–plateau" processes and can't replicate the fast reaction of shale oil. More importantly, with natural decline rates climbing, new projects mostly just "fill the gap" rather than create net increases.
Within this framework, Barclays gives a striking forecast: by 2028–2030, annual non-OPEC crude supply growth might be close to zero.
When demand persists—and spare capacity disappears—prices must search upward for balance
The real danger in supply-side change is that it's rapidly eroding OPEC+'s "safety buffer."
Barclays calculates that if demand follows a path between IEA and OPEC predictions—a relatively moderate but realistic assumption—OPEC+'s available spare capacity will drop sharply around 2027, and may reach near-extreme levels by the end of this decade.
What does this mean? It means the future oil market will shift from a “price-led cycle” back to a “supply-constrained cycle”:
Geopolitical conflict, extreme weather, and political risks will be rapidly magnified;The price fluctuation range will rise as a whole;The market will need higher long-term oil prices to re-incentivize capital spending and bring supply back.
In this sense, Barclays sees that efficiency gains from AI—even potential production boosts—are not reasons to suppress oil prices, but simply "just enough" to patch the gap. Even if AI is fully adopted, the extra output will only fill part of the future supply shortfall.
This isn’t a “trading rebound,” but the start of a new cycle repricing
Based on the above, Barclays’ stance on energy assets is clear: this is not the end of the cycle, but the "undervalued pricing stage" in a multi-year uptrend.
This also explains why, even before oil prices have fully broken out, energy stocks have already outperformed—the market is preemptively pricing in a scenario of "higher for longer" oil, but valuations are still far below historic cyclical peaks.
More importantly, differentiation is happening:
Upstream resource quality and reserve life have again become the core for valuation;Oil service segments, thanks to stronger long-term visibility, now show more "cycle extension" potential;Traditional "high dividends, defensive" labels are being replaced by "supply scarcity" attributes.
To sum it up: In Barclays' view, the market remains bogged down in debates about the "theoretical surplus in 2026," while the real, crucial change has quietly emerged in supply structure.
If this assessment holds, then the next story for crude oil isn’t “how low can it go,” but “where will a multi-year bull market first be confirmed.”
Risk Warning and DisclaimerThe market carries risk—investing requires caution. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this text are appropriate to their unique circumstances. Investing accordingly is at your own risk.
