Crude oil prices took a hit on Monday, with December WTI crude oil closing down -0.18 (-0.30%) and December RBOB gasoline closing down -0.0215 (-1.07%). The decline was attributed to investors adopting a risk-off stance amidst a drop in stocks and concerns about anticipated weak US economic reports scheduled for the week. Additionally, Russia’s key oil export port of Novorossiysk reportedly resumed some operations following Ukrainian attacks last Friday.
Despite the drop in prices, oil prices had some underlying support from ongoing geopolitical risks related to Russia. Last Friday, Iran seized an oil tanker in the Gulf of Oman, and there were reports of a US military buildup for a possible attack on Venezuela, a significant oil producer. Furthermore, reduced crude exports from Russia were also supportive of oil prices. Ukraine’s targeting of Russian refineries over the past few months has led to a fuel crunch in Russia and limited the country’s crude export capabilities.
On the other hand, OPEC revised its global oil market estimates from a deficit to a surplus in Q3, citing higher than expected US production and increased crude output from OPEC. The EIA also raised its 2025 US crude production estimate to 13.59 million bpd. OPEC+ announced a production increase of +137,000 bpd in December but plans to pause production hikes in Q1-2026 due to an emerging global oil surplus.
Vortexa reported an increase in crude oil stored on tankers that have been stationary for at least 7 days, reaching the highest level since June 2024. The latest EIA report showed US crude oil inventories below the seasonal 5-year average, with record high crude oil production. Baker Hughes reported a slight increase in the number of active US oil rigs, which is still above the 4-year low set earlier this year.
Overall, the oil market is facing a delicate balance between geopolitical tensions, production increases, and shifting global demand. It remains to be seen how these factors will play out in the coming weeks and months.
