At some point, however, the risks around oil prices will start to tilt back towards the upside. The growth rate of US shale, the main driver of non-OPEC supply growth, looks to have peaked. Certainly, the rapid expansion of the last 15 years is unlikely to be repeated. Meanwhile, sanctions on Russian oil could further tighten the market. OPEC spare capacity has been steadily shrinking, and the political alignment between the US and Saudi Arabia will not last indefinitely. Over the longer term, a sustained period of lower prices risks underinvestment, setting the stage for supply to tighten.
There is also a growing consensus that 2026 could mark the start of a cyclical rebound in the global economy. Global monetary policy is more accommodative. The Federal Reserve has cut interest rates in each of its last three meetings and resumed asset purchases, with other major central banks either having already eased or signalling a similar path
Fiscal policy is also more supportive. The effects of Trump’s One Big Beautiful Bill Act are starting to feed through, Germany looks set to ease its fiscal handbrake, and Japan has signalled looser policy. China may yet join the party to bolster its struggling economy. All of this is unfolding against a background of largely resilient economic growth and inflation stubbornly above target.
So, whilst oil markets remain in surplus, the durability of this balance remains uncertain. Current supply levels and geopolitical developments may weigh on prices in the near term. But, if supply forecasts prove too optimistic, potential disruptions could lead supply to tighten. At the same time, policymakers seem prepared to support an already heated economy, a backdrop which tends to favour cyclical commodities such as oil.
Moreover, with equity markets at record highs, rising energy prices could become an underappreciated pressure point. That makes exposure to commodities, particularly physical oil and related equities, not only an inflation hedge but a potential source of portfolio resilience and meaningful upside. With prices low and sentiment deeply depressed, oil stands out as one of the most asymmetric opportunities in the commodity complex, a view we have started to reflect within the portfolio.
