Oil prices have rallied unexpectedly despite a consensus view of a persistent supply glut, leaving analysts puzzled about the disconnect. Brent crude futures gained roughly 15% since January while West Texas Intermediate rose 14%, defying the 2025 price collapse driven by oversupply. The International Energy Agency estimated a 3.7 million barrel per day surplus entering 2026, yet geopolitical shocks and stronger-than-expected demand are now dominating the market. Sanctions on Rosneft and Lukoil appear to have removed about 600,000 bpd from the market, while drone strikes reduced Caspian exports by 440,000 bpd.

Simultaneously, growing US-Iran tensions threaten the critical Strait of Hormuz. Demand has also defied expectations, with China's storage expansion and surprising January jobs data supporting prices, even as OPEC+ production remains below quotas. Goldman Sachs maintains a $56 Brent target for 2026, acknowledging that geopolitical risks could sustain elevated prices despite the glut.