DTN Oil Update
Oil Futures Down 4% on Week Amid Oversupply Fears
SECAUCUS, N.J. (DTN) -- Crude futures tumbled 4% on the week at the close of Friday's, Dec. 12, trading, amid fears of oversupply, driven by the potential lifting of sanctions on Russian oil and forecasts that global production next year will outpace demand.
Sanctions on Russian oil are expected to be lifted if Russia and Ukraine agree to a U.S. initiative to end the more than three-year war between them. Ukrainian President Volodymyr Zelensky said Thursday, Dec. 11, he might ask his country to vote on whether to cede its Donbas region to Russia, raising hopes that a solution might be imminent in the near four-year long conflict.
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Millions of barrels belonging to Russia's Rosneft and Lukoil are currently at sea, unable to reach refineries in India and China due to Ukraine-related sanctions imposed by the U.S. and Europe. The oil now on water, along with more supply from Russia after the end of the Ukraine war, could add significantly to the global crude glut, traders said.
The International Energy Agency (IEA) said in its December report this week that despite an improved macroeconomic outlook and the sanctions on Russian and Venezuelan oil, it still expected a worldwide surplus of 3.84 million bpd for 2026. That was only slightly lower than the 4.09 million bpd the agency originally forecast for next year in its November report.
The Organization of the Petroleum Exporting Countries' forecast of higher oil demand in 2026 -- some 500,000 bpd above the IEA's prediction, at 1.38 million bpd -- have done little for market sentiment.
U.S. sanctions on Venezuelan oil have also barely boosted the geopolitical risk premium in crude as the Trump administration carries out a maximum pressure campaign against the regime of President Nicolas Maduro. The Treasury's Office of Foreign Assets Control announced on Thursday, Dec. 11, fresh sanctions on three of Maduro nephews, along with a businessman and six shipping companies and their assets. That was after U.S. troops seized earlier this week a Venezuelan oil cargo.
The NYMEX WTI futures contract for January delivery settled Friday's session down $0.16 at $57.44 bbl, down 4.1% on the week. It hit a two month-low of $57.04 on Thursday.
ICE Brent for February shipment slid $0.17 bbl to $61.11 bbl, registering a two-month bottom at $60.79 in the prior session.
Downstream, RBOB futures contract for January delivery slipped $0.0070 to $1.7528 gallon. ULSD futures for delivery in January dipped $0.0273 to $2.2016 gallon.
