Despite new US sanctions on Russian oil producers, Goldman Sachs remains bearish, forecasting a decline. They argue that spare capacity from OPEC, exemptions for buyers, and the reorganization of trade networks will mitigate any supply disruption, preventing a sustained price spike and leading to lower prices by 2026.

Despite the absence of a real surplus, oil prices are unlikely to surge. China has built massive strategic reserves and consistently sells from them when Brent crude moves above $70 per barrel. This acts as a ceiling on the market, creating a range-bound environment for prices in the $60s.

As its import needs peak, China is positioned to transition from a simple demand center to a sophisticated global LNG trader. Its vast storage capacity, extensive regasification infrastructure, and diverse contract portfolio will provide the flexibility and optionality to resell cargoes and influence global energy flows.

Despite healthy global oil demand, J.P. Morgan maintains a bearish outlook because supply is forecast to expand at three times the rate of demand. This oversupply creates such a large market imbalance that prices must fall to enforce production cuts and rebalance the market.

Analysts create a false “manufactured surplus” by misinterpreting data. They incorrectly count US Strategic Petroleum Reserve additions as market supply and fail to recognize China's massive inventory buildup as a strategic reserve for war or sanctions, not commercial oversupply.

A potential price collapse will be averted by the market's own circular logic. Sub-$60 prices will stimulate an extra 500,000 barrels per day of demand from price-sensitive regions while simultaneously forcing high-cost non-OPEC producers to shut down production, creating a natural market equilibrium.

While many fear production shutdowns, a more significant and probable risk is a logistical shock from shipping disruptions. Even modest delays in tanker transit times could effectively remove millions of barrels per day from the market, causing a significant price spike without a single well being shut down.

EM local markets have surprisingly not reacted to a nearly 20% surge in oil prices. Analysts believe investors are dismissing the rally as either a temporary geopolitical premium or, more importantly, a consequence of strong global demand. This latter interpretation makes the price increase less concerning for oil-importing nations.

As Russia redirects crude, China has become a key buyer, increasing imports so much that they now exceed an informal 20% cap on any single supplier's share. This signals a strategic energy policy shift and highlights China's role as a willing buyer for sanctioned Russian barrels.