Oil Declines as Concerns of Surplus Offset Geopolitical Risks
Oil slipped on the first trading day of 2026 as expectations for a swelling supply surplus offset geopolitical risks to production in several OPEC+ nations.
Brent crude futures traded below $61 a barrel, after capping an 18% slump in 2025 — the biggest loss since 2020 — while West Texas Intermediate was just above $57, as both erased earlier modest gains. The slide came as Middle Eastern markets — including derivatives like the regional Dubai benchmark — faltered, with heavy selling pressure on a key trading window in Asian hours, traders familiar with the matter said.
Faced with a seasonal lull in consumption, the Organization of the Petroleum Exporting Countries is leaning toward caution. Key OPEC+ members led by Saudi Arabia will convene online on Jan. 4, when they are expected to reaffirm a decision to pause supply increases during the first quarter.
Prices slumped in 2025 as both OPEC+ and competitors from the US to Guyana bolstered output while demand growth slowed. The International Energy Agency has forecast a glut of about 3.8 million barrels a day for this year.
That’s tempering the threat to oil supplies across several OPEC+ nations.
President Donald Trump said the US will “rescue” protesters if Iran shoots or kills them, according to a post on Truth Social on Friday. Tehran and other cities have seen a wave of demonstrations after the local currency collapsed to a record low. President Masoud Pezeshkian has sought to appease the crowds by pledging to revise planned tax increases, acknowledging they have “legitimate demands.”
Trump’s administration has stepped up a campaign against Venezuela’s oil exports by sanctioning companies in Hong Kong and mainland China, along with vessels accused of evading curbs. The moves are part of a drive to raise the pressure on the regime of Nicolas Maduro.
Russia made a formal diplomatic request that the US stop its pursuit of a tanker that had been sailing for the South American nation to pick up oil, but is now fleeing from the Coast Guard in a chase across the Atlantic Ocean, the New York Times reported. The ship, known as the Bella 1, had started its journey in Iran.
Following a significant military build-up in the region, the US has imposed a partial blockade on oil vessels calling at Venezuela, and also struck an alleged drug-related facility inside the country.
Meanwhile, Russia and Ukraine attacked each other’s Black Sea ports over the new year period, damaging infrastructure including a refinery. The conflict has impacted energy flows from Kazakhstan, another nation in the OPEC+ alliance.
“Geopolitical events will support crude prices in the short term,” said Robert Rennie, head of commodity and carbon research at Westpac Banking Corp. Still, lower prices are expected over the first quarter on oversupply concerns and potential progress toward a peace deal in Ukraine, he said.
Source: Bloomberg.com
