S&P Global sees first US crude output drop since 2020 as surplus, weak demand grip market
US production is set to fall 640,000 bpd by end-2026, the first annual decline since 2020, as a 4 million bpd global surplus looms.
S&P Global now expects US oil production to fall by 640,000 barrels per day by the end of 2026, with output dropping to 12.96 million bpd — the first year-on-year decline since 2020 and a cut of 378,000 bpd from the firm's previous projections.6
The downgrade lands as the market confronts a surplus scenario that has banks and agencies scrambling to reset their outlooks. The International Energy Agency said on July 10 that global oil demand could decrease for the first time since 2020, following months of trade restrictions in the Middle East and ongoing geopolitical turmoil, a view echoed in OPEC's most recent 2026 demand growth forecast.5
The supply side is doing the rest of the damage. OPEC+ has increased output for five straight months, and the IEA warns the market could face a surplus of nearly 4 million bpd in 2026 — around 4% of global demand — even as the United States, Brazil, Canada and Guyana continue pumping at record or near-record levels.4
That combination has pushed the banking consensus sharply bearish. J.P. Morgan trimmed its Brent crude outlook for the rest of 2026, now expecting prices to average $86 a barrel in the third quarter, drop to $80 in the fourth, and finish the year at $78.2
Goldman Sachs has been more aggressive. The bank slashed its fourth-quarter 2026 Brent forecast to $80 a barrel from $90, citing easing Iran tensions and a surge in non-OPEC supply.3 It has also revised down its 2027 estimate to an average of $80, based on stronger supply and China's diversification away from oil; the bank assumes just over 10% of the demand weakness persists as China shifts, estimating that consumption of gasoline and related products in the country may have fallen by as much as 20% on the year in April.1
The bearish consensus is not uniform, and the tail risks are real. Goldman analysts noted that if a key Middle East route remains closed until the end of 2026, Brent crude could begin 2027 at $140 a barrel.1 That is a wide enough spread to keep volatility premiums alive even as prompt prices drift lower.
Front-month ICE Brent traded at $90.15 a barrel on Wednesday (2026-07-29), up 0.72%, while NYMEX WTI front-month sat at $85.00, up 0.45%. The resilience in prompt prices against the backdrop of a looming surplus suggests the market is still pricing some geopolitical risk, but the forward curve tells a different story as the banks align on sub-$80 levels from the fourth quarter onward.
The US production decline is the key swing factor. A drop of 640,000 bpd by end-2026 would remove roughly half the surplus the IEA projects, but it will not happen fast enough to prevent the build. Shale producers are already responding to lower prices, yet the lag between drilling decisions and actual output means the market will likely be deep in surplus before the supply response arrives.
For traders, the trade is straightforward: the curve is telling you the fourth quarter is long, and the banks are confirming it. But the $140 tail scenario from Goldman is a reminder that geopolitics can reprice this market in a single session, as seen on Wednesday (2026-07-29) when Brent held above $90 despite the bearish forecasts.2,5
The watch item is whether US output data confirms the S&P Global trajectory in the coming months. If the decline materialises faster than the 640,000 bpd estimate, the surplus shrinks and the bearish calls get revised. If it lags, the fourth-quarter $80 consensus becomes a ceiling rather than a target.6,3
A wider cut in fuel prices in major consuming countries could also shift the demand picture; some analysts say August could be a window for such cuts, around the time of state elections, but only if crude remains low for some time.4 That is a demand-side catalyst worth monitoring as the surplus narrative builds.