Oil Fluctuates as Traders Weigh Surplus, Geopolitical Risks

Oil steadied on the first trading day of 2026 as expectations for a supply surplus offset geopolitical risks to production in several OPEC+ nations. 

Brent crude futures settled below $61 a barrel in relatively thin trading, while West Texas Intermediate settled above $57. Middle Eastern markets, including derivatives like the regional Dubai benchmark, faltered amid heavy selling pressure on a key trading window in Asian hours, traders familiar with the matter said.

Faced with a seasonal lull in consumption, the Organization of the Petroleum Exporting Countries is leaning toward caution. Key OPEC+ members led by Saudi Arabia will convene online on Jan. 4, when they are expected to reaffirm a decision to pause supply increases during the first quarter.

Prices slumped in 2025 as both OPEC+ and competitors ranging from the US to Guyana bolstered output while demand growth slowed. The International Energy Agency has forecast a glut of about 3.8 million barrels a day for the year. 

Amid those expectations, advisers shifted to 91% short in Brent Friday, up from 82%, according to data from Kpler’s Bridgeton Research Group. The advisers were 73% short in WTI.

The surplus forecast is acting as a shock absorber against an array of potential output disruptions.

One such scenario could emerge in Iran, where US President Donald Trump suggested the US is ready to aid protesters if authorities crack down on unrest, prompting a top Iranian official to threaten retaliation against US forces in the region. Tehran and other cities have seen a wave of demonstrations after the local currency collapsed to a record low. Iran was the world’s ninth-largest producer of crude oil in 2023, according to the IEA.

Another risk is in Venezuela, where the Trump administration has stepped up a campaign against the country’s oil exports through a maritime blockade and by sanctioning companies in Hong Kong and mainland China, along with vessels accused of evading curbs. The moves are part of a drive to choke off oil revenue and raise the pressure on the regime of Nicolas Maduro.

Meanwhile, Russia’s war on Ukraine continues despite peace efforts by Europe and the US. Moscow and Kyiv attacked each other’s Black Sea ports over the new year period, damaging oil infrastructure including a refinery. The conflict has impacted energy flows from Kazakhstan, another nation in the OPEC+ alliance.