Oil prices fall as supply outlook offsets disruptions in Venezuelan flows

[DENVER] Oil prices slid on Monday as investors balanced disruptions linked to escalating US-Venezuelan tensions with oversupply concerns and the impact of a potential Russia-Ukraine peace deal.

Brent crude futures settled down 56 cents, or 0.92 per cent, to US$60.56 a barrel, and US West Texas Intermediate crude settled at US$56.82 a barrel, down 62 cents, or 1.08 per cent.

Both contracts slid more than 4 per cent last week, weighed down by expectations of a global oil surplus in 2026.

Venezuela’s oil exports have fallen sharply since the US seized a tanker last week and imposed fresh sanctions on shipping companies and vessels doing business with the Latin American oil producer, according to shipping data, documents and maritime sources.

The market is closely monitoring developments and their impact on oil supply, with Reuters reporting the US plans to intercept more ships carrying oil from Venezuela following the tanker seizure, intensifying pressure on Venezuelan President Nicolas Maduro.

Venezuela’s state-run oil company PDVSA suffered a cyberattack, it said on Monday, and tankers due to pick up crude there were making u-turns as tensions escalated.

“The grind lower in oil prices and the achieving of month-to-date lows across the major futures complex last week might have seen more negative pricing if it were not for the upping of the ante by the United States with regard to Venezuela,” said John Evans, an analyst with PVM.

Still, ample oil supplies already en route to China - Venezuela’s biggest oil buyer - as well as plentiful global supplies and weaker demand are buffering some of the impact of supply disruptions tied to the tanker seizure.

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Progress in US peace talks also pushed the market lower on Monday.

Ukrainian President Volodymyr Zelensky offered to drop his country’s aspiration to join the Nato military alliance as he held five hours of talks with US envoys in Berlin on Sunday. A second round of talks concluded on Monday.

“Over the past two days, Ukrainian-US negotiations have been constructive and productive, with real progress achieved,” Rustem Umerov, secretary of the National Security and Defence Council, wrote on X after Monday’s talks.

A possible peace deal could eventually increase Russian oil supply, which is currently sanctioned by Western countries.

Rising expectations of a surplus also weighed on prices, as did weaker economic data out of China. Factory output there slowed to a 15-month low in November, while retail sales grew at their weakest pace since December 2022.

JPMorgan Commodities Research said in a note on Saturday that oil surpluses in 2025 were expected to widen further into 2026 and 2027, as global oil supply was projected to outpace demand, expanding at three times the rate of demand growth through 2026.

“Risk off, with US equities markets trading lower, and weaker than expected Chinese economic data are not helping crude oil,” said Giovanni Staunovo, an analyst with UBS. REUTERS