Oil Rises Slightly, But Where Is It Really Heading?
Oil prices continued their slight rise in recent trading. Brent traded around $63 per barrel after rising 0.4% in the previous session, while WTI held above $59 per barrel. This rise occurred amid market focus on two key geopolitical issues: the inconclusive Ukraine ceasefire talks and the escalating tensions between the United States and Venezuela. US President Donald Trump's statement that his envoy's meeting with Russian President Vladimir Putin was "pretty good" but that peace was not guaranteed kept the market calculating supply risk scenarios.
From a geopolitical perspective, Trump's comments about plans to "soon attack drug cartels on land in Venezuela" added to tensions. The buildup of US troops in the region raised market concerns that the situation could disrupt oil production or distribution from Venezuela, a country with substantial reserves, although production is currently significantly lower than in the past. This situation creates a "risk premium" in oil prices: the market adds a small extra price to anticipate potential supply disruptions, helping to support Brent and WTI's gains.
However, despite these geopolitical sentiments, oil fundamentals remain generally bearish (depressing prices). OPEC+ is reinstating previously cut production, while other producers outside the cartel are also increasing output. Demand, however, is expected to be less robust. This year, demand from China helped hold down prices, but the CEO of Hengli Petrochemical International estimates that Chinese oil consumption will remain sluggish until at least mid-2026. This means that supply is abundant, while demand is less aggressive—a combination that typically limits price increases.
A similar view comes from major players in the commodity market. Trafigura Chief Economist Saad Rahim believes that "no matter how much demand increases, the market remains very well supplied," so the most straightforward path for prices is likely to be downward in the medium term. US stockpile data also supports the oversupply narrative: US crude oil inventories increased by around 574,000 barrels in the past week, and gasoline and distillate (like diesel) stocks also rose. These additional stocks signal that the physical market is not experiencing a shortage, limiting the room for price increases.
As for the outlook for next year, the outlook is mixed:
Short-to-medium term: Oil prices have the potential to frequently "pull up" whenever there's news of conflicts in Ukraine, Russia, or Venezuela, but these gains are easily dampened because the market knows global supply remains abundant.
Over the next year: As long as there are no major disruptions that significantly cut off physical supply (e.g., a new major embargo or major infrastructure damage), oil prices are likely to move within a range with a slight downward bias. Geopolitics could cause temporary spikes, but excess supply and moderate demand will continue to act as natural "brakes" on price rallies. (asd)
Source: Newsmaker.id
