Market Overview Oil prices tumbled sharply on Thursday, hitting fresh weekly lows, with Brent crude nearing the $60 threshold. A late-night report that the U.S. is preparing to seize additional tankers transporting Venezuelan oil helped prices recover nearly half of their intraday losses. The U.S. action targets vessels suspected of carrying other sanctioned crude, such as Iranian oil, disrupting at least three shipments totaling 6 million barrels of Venezuelan Merey crude. This escalation risks triggering an export crisis for Venezuela, forcing markets to reassess the impact. Earlier, Ukrainian drone strikes on Russian energy infrastructure—including attacks on Kazakhstan’s CPC terminal, which disrupted over 10% of its daily output—failed to buoy sentiment or halt the oil price slide.
Supply-Demand Dynamics Both the International Energy Agency (IEA) and OPEC released monthly reports on Thursday. While OPEC maintained its optimistic outlook, the IEA trimmed its forecast for a record oil supply glut for the first time since May. Global supply is now projected to exceed demand by 3.84 million barrels per day (bpd), down from November’s estimate of 4.09 million bpd. Despite the narrower surplus, the sheer oversupply continues to dominate market sentiment. Middle East crude benchmarks slid across the board, with Dubai crude hitting a three-week low, as bearish fundamentals overshadowed recent geopolitical disruptions.
Trading Strategy As highlighted earlier, oil markets are caught between surplus pressures and geopolitical or macro-driven volatility. While escalating tensions have caused price swings, their impact remains weaker than expected, with mounting evidence that oversupply—the core market driver—is strengthening bearish momentum. Prices remain on a downward trajectory, reinforcing recommendations to prioritize short-selling opportunities at higher levels while monitoring market rhythms.
Daily Market Moves - WTI crude futures fell 1.47% to $57.60/barrel; Brent dropped 1.49% to $61.28/barrel. - INE crude futures declined 1.27% to ¥435.6. - The USD index dipped 0.28% to 98.36, while the Dow Jones surged 1.34% to 48,704.01.
Key Developments 1. **IEA Revises 2026 Oil Demand Growth Upward, Trims Surplus Forecast** The IEA upgraded its 2026 global oil demand growth outlook, citing improved macro conditions and eased tariff concerns, while lowering supply growth projections due to sanctions on Russia and Venezuela. The agency now expects a 3.84 million bpd surplus in 2025 (vs. 4.09 million bpd previously). Non-OPEC+ supply is forecast to grow by 1.7 million bpd in 2025 and 1.2 million bpd in 2026, driven by petrochemical feedstock demand.
2. **Ukraine Strikes Russian Caspian Oil Field** Ukrainian drones hit Lukoil’s Filanovsky field in the Caspian Sea, disabling 20+ wells and cutting output by ~120,000 bpd. The attack expands Kyiv’s campaign to cripple Russia’s energy revenue streams, following recent strikes on Black Sea oil infrastructure and shadow tankers.
3. **Middle East Crude Premiums Collapse Amid Demand Fears** Dubai crude’s premium to swaps plunged to a three-week low of $0.51/barrel, as bearish sentiment overrode supply risks from U.S. tanker seizures. Traders eye rising Asian demand for discounted Russian oil, which could further dent Middle East crude appetite. Geopolitical disruptions—including Kazakhstan’s output cuts and Ukraine’s tanker attack—were ignored by markets.
4. **OPEC Holds Demand View, Signals Supply Discipline** OPEC kept its 2025/26 demand growth forecasts at 1.3 million bpd and 1.38 million bpd, respectively, while raising non-OPEC+ supply estimates. The group’s December output edged down to 28.48 million bpd, though OPEC+ overall added 43,000 bpd. Saudi Arabia’s price cuts to five-year lows reflect mounting competition for market share. With Brent hovering near $61 and WTI at $57, focus remains on the clash between geopolitical risks and structural oversupply.