Oil Prices Stagnant Amid Surplus Fears While Geopolitical Tensions Add New Layers of Risk

Gerik

Summary:

Oil prices remain near two-month lows due to persistent oversupply concerns, despite upbeat global financial sentiment. Meanwhile, geopolitical tensions are deepening...

Oil Pressured by Surplus Outlook

Crude oil prices held steady near $61 per barrel, hovering around their lowest point since October. While global equities rallied after the U.S. Federal Reserve delivered a rate cut and expressed optimism on the economic outlook, oil did not follow suit due to supply-side anxieties.

The International Energy Agency (IEA) reaffirmed its projection of an unprecedented oil surplus in 2026, noting that global inventories are now at a four-year high. This reinforces the downward pressure on Brent crude, with futures edging closer to the $60 psychological support.

Haris Khurshid of Karobaar Capital noted that “traders are happy to buy a bit of risk, but the fundamental surplus hasn’t gone anywhere,” signaling that bullish macro sentiment hasn't translated into commodities like oil.

Geopolitical Flashpoints Add Mixed Signals

Oil prices found modest geopolitical support after President Trump ordered new sanctions against Venezuela, including on six oil tankers and the nephews of President Maduro. This came shortly after the U.S. seized a sanctioned supertanker, escalating its campaign to choke off oil revenues to the Maduro regime. Analysts interpret this as a shift toward more aggressive economic statecraft.

However, the market reaction was muted, likely due to the relatively small volume impact of Venezuelan oil exports in the global supply picture, especially amid surplus conditions.

Putin's Financial Resilience Threatens Long-Term Stability

Meanwhile, tensions surrounding the Russia-Ukraine conflict remain unresolved, despite U.S. President Donald Trump’s push for a peace deal. According to former Russian central bank deputy Sergey Aleksashenko, Putin can fund the war for at least 2–3 more years, despite budget deficits and economic stagnation.

Although Russia’s GDP growth forecast has slowed to 0.9% (from 4.3% last year), Aleksashenko emphasized that the government retains significant financial firepower to sustain military operations. The Bank of Russia is even suing Euroclear in response to frozen assets, highlighting tensions with Western institutions.

Adding to NATO’s concern, Secretary General Mark Rutte warned that Russia could be ready to use military force against NATO in five years, citing its war-focused economy.

U.S. Peace Efforts Losing Momentum

President Trump is reportedly frustrated by stalled peace talks, criticizing European leaders and Ukrainian President Zelenskyy for lacking urgency. Trump claims Russia has accepted the U.S.-drafted peace proposal, while Ukraine has not, possibly due to controversial terms such as territorial concessions and military downsizing.

The White House insists peace efforts are ongoing, but Trump is “sick of meetings just for the sake of meeting.” His administration appears to be pressuring Ukraine to agree to a deal before Christmas, a timeline many analysts view as unrealistic.

Oil Markets Stuck Between Surplus and Shocks

Oil prices are being pushed down by tangible supply concerns but are also held up by the potential for geopolitical disruption. With Russia showing resilience in its war financing and Trump growing impatient in diplomacy, the potential for policy-driven or military shocks remains a key upside risk for oil in 2026.

In the short term, however, unless there is a supply disruption or major geopolitical escalation, prices may continue to hover in the $60–$65 range, weighed down by inventory levels and muted demand.

Source: CNBC

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