Geopolitical developments have moved oil prices in both directions in recent days. Yet, the movements up or down were short-lived and smaller than they would have been if the market were tight or balanced.
But the feared oversupply is already here, manifested in the largest volume of oil in floating storage accumulated since the 2020 pandemic year, when the crash in demand led to a major stock surge both on land and on tankers at sea.
The well-supplied market with Brent crude prices barely hanging on to the $60 per barrel handle has kept prices from surging when the U.S. escalated the blockade and seizure of tankers carrying oil to and from Venezuela over the past week.
The bearish oil market, with expectations of near-record oversupply early next year, has probably given the Trump Administration more “ammunition” to pursue the blockade off Venezuela, comforted by the low oil prices and the prospect of further slides in the crude futures due to ample supply.
Related: $60 Oil Is No Longer a Floor
Oil prices move higher each time the blockade intensifies and turns into a seizure of a Venezuela-linked tanker, but the price hike is modest as the market glut cushions the blow.
For instance, oil prices climbed in early Asian trading on Monday as the U.S. intensified its targeting of oil tankers off the coast of Venezuela, including the seizure of a second oil tanker and the pursuit of a third. The price rise was less than 1%, though, as oversupply continues to cap gains.
Venezuela is not the only wild card in the market these days, and in early 2026. Russia’s supply could also move prices, in either direction, depending on the progress, or a lack of such, in the peace talks to end the war in Ukraine.
Signals of progress in talks early last week sent oil tumbling. But reports two days later that the U.S. prepares a barrage of new sanctions against Russia in case Vladimir Putin rejects a peace deal moved oil higher again.
Intensified sanctions on Russia’s energy sector “pose a larger supply risk to the market — in case President Putin fails to agree to a peace deal with Ukraine,” ING’s commodities strategists Warren Patterson and Ewa Manthey said last week.
“Given the surplus outlook and Brent trading around $60/bbl, Trump has room to be more aggressive with sanctions,” they added.
A potential peace deal, however, would eventually bring eased sanctions on Russia and accelerate the global supply build.
Currently, a part of the massive volume of oil in floating storage – estimated at about 1.3-1.4 billion barrels by vessel-tracking data providers – is Russian crude that buyers are still hesitant to accept after the U.S. sanctioned the top Russian oil producers and exporters, Rosneft and Lukoil.
These stranded Russian barrels will eventually find their buyers, mostly in China and partly in India, Reuters columnist Ron Bousso argues.
Offshore Venezuela, in the worst-case scenario for Venezuela’s crude supply, with additional restrictions and a shortage of diluents to help the heavy crude flow for exports, Venezuela could lose up to 500,000 barrels per day (bpd) of its oil production, according to Reuters estimates.
The fact that the U.S. can afford to remove Venezuelan supply from the market, except for cargoes of licensed Chevron to ship crude to the United States, suggests that the Trump Administration is confident enough that it could continue exerting pressure on Venezuela without major price spikes in U.S. gasoline prices. The same applies for Russia, where the well-supplied market could allow the U.S. to be more aggressive in sanctions on Russia, should it choose to do so.
Geopolitics, with developments in Venezuela and Russia, will move oil prices in the coming weeks. But the biggest market driver so far appears to be the oversupply, which cushions the effects of sanctions and blockades, leaving Brent crude prices at about $60 per barrel. Analysts expect the crude futures to average at or below $60 a barrel next year amid ample supply and seasonally weaker demand in the first quarter of 2026.
By Tsvetana Paraskova for Oilprice.com
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