By late morning in New York, Brent crude futures had dropped by just over a dollar to around $61 a barrel, while U.S. West Texas Intermediate fell to roughly $57. Both benchmarks posted losses of close to 2% on the day. The declines came despite a modest rebound earlier in the week, which had lifted prices from near five-year lows reached in mid-December.
The broader trend, however, remains decisively bearish. Oil prices are on track for their steepest annual decline since 2020, with Brent down about 18% and WTI nearly 20% for the year. Rising crude production across major producers has fueled concerns that global supply will outstrip demand well into next year, keeping downward pressure on prices.
Analysts note that geopolitical tensions have only temporarily masked this imbalance. According to Aegis Hedging, recent risk premiums linked to global conflicts have provided short-term price support but have failed to alter the underlying narrative of oversupply. Data from the International Energy Agency reinforce this view, projecting that global oil supply in 2026 will exceed demand by nearly 3.8 million barrels per day.
Markets are also closely watching diplomatic developments surrounding the Russia–Ukraine war. Investors see the prospect of a peace agreement as a potential turning point for energy markets, particularly if it leads to the easing or removal of sanctions on Russian oil exports. Ukrainian President Volodymyr Zelenskiy is scheduled to meet U.S. President Donald Trump in Florida this weekend, with discussions expected to focus on territorial disputes and security guarantees—key obstacles to ending the conflict.
Signs of behind-the-scenes engagement have added to market expectations. The Kremlin confirmed that a senior aide to President Vladimir Putin has been in contact with U.S. officials following the receipt of American proposals related to a possible peace framework. Even incremental progress has been enough to reduce the war-related risk premium embedded in oil prices, traders say.
“The negatives remain elevated global oil storage levels and tentative progress on Ukraine-Russia peace talks,” said Dennis Kissler, senior vice president of trading at BOK Financial, noting that both factors continue to cap price rallies.
Elsewhere, geopolitical developments appeared to have limited impact on crude markets. The White House has directed U.S. military forces to focus on enforcing a de facto “quarantine” of Venezuelan oil shipments over the coming months, signaling a preference for economic pressure rather than military escalation. Analysts believe the move is unlikely to significantly affect global oil prices in the near term.
Similarly, a U.S.-backed strike against Islamic State militants in northwestern Nigeria did little to move markets. Analysts emphasized that the operation did not target oil-producing regions or export infrastructure, which are largely concentrated in southern Nigeria. With thin trading volumes during the Boxing Day holiday period, many traders opted to stay on the sidelines.
Taken together, the week’s developments underscore a market increasingly driven by fundamentals rather than fear. As supply continues to rise faster than demand and geopolitical risks show signs of easing, oil prices remain vulnerable to further declines in the months ahead.