Oil fell as traders weighed progress on a deal to end Russia’s war in Ukraine, a possibly bearish development for an oil market staring down a glut.
West Texas Intermediate dropped 2% to settle at $57.13 a barrel, wiping out Monday’s gains. President Donald Trump’s administration and Ukraine’s allies converged toward an agreement to offer security guarantees long sought by Kyiv during a Tuesday meeting of the so-called coalition of the willing.
An end to the conflict would likely eliminate supply disruptions in Russia, adding more oil to an already oversupplied market.
Traders were also digesting the ouster of Venezuelan leader Nicolas Maduro by US forces, with big oil companies set for talks with Washington regarding Venezuela’s energy sector. And there are simmering risks in the Middle East as protests continue in Iran.
“I don’t perceive significantly higher prices almost regardless of what events happen with Iran, with Ukraine and with Venezuela,” Ben Luckock, global head of oil at Trafigura Group, told Bloomberg TV. He added that the barrels Venezuela is likely to return this year are “very, very few.”
The broader market is grappling with a swelling surplus and Venezuela only accounts for a small fraction of global output despite its huge reserves, meaning any disruption to the country’s exports is unlikely to have a sustained price impact. The glut has prompted Saudi Arabia to trim crude prices to Asia for a third month.
“It seems like the market is back to being focused on fundamentals,” said Darrell Fletcher, managing director for commodities at Bannockburn Capital Markets. “The reaction from the weekend was muted indeed, but it looks like back to a downward trend.”
What Bloomberg strategists say
“Oil remains below its six-month average, suggesting the market is continuing to look through geopolitical headlines and focus instead on the prospect of a growing surplus.”
—Nour Al Ali, Markets Live strategist.
And in the longer run, a return to considerable production in Venezuela could push down prices as well. Years of underinvestment left the country’s energy infrastructure in poor shape, but that could change if major oil companies return. Chevron Corp. is the only American major operating in the nation under special US permission. A small fleet of ships booked by the oil major is sailing to Venezuela this month.
Trump only furthered bearish sentiment at a House Republican retreat, when he said he would meet with oil companies. “We have a lot of oil to drill, which is going to bring down oil prices even further,” he said.
The global surplus is expected to expand in the first half and reach its peak mid-year, according to Morgan Stanley, which cut its price forecasts for the first three quarters of 2026. Oil futures capped their biggest annual decline since 2020 last year, as OPEC+ and other producers added more barrels to the market.
Oil Prices
West Texas Intermediate for February delivery fell 2% to settle at $57.13 a barrel in New York.
Brent for March settlement fell 1.7% to settle at $60.70 a barrel.
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