Oil prices have begun the new year on a positive note, with Brent crude futures and US West Texas Intermediate crude experiencing a slight increase. As of 0409 GMT on Friday, Brent crude futures rose by 35 cents to $61.20 a barrel, while US West Texas Intermediate crude stood at $57.76 a barrel, up 34 cents. This development comes after oil prices posted their biggest annual loss since 2020, with both Brent and WTI benchmarks recording nearly 20% losses in 2025.
The current situation is influenced by various geopolitical factors, including Ukrainian drones targeting Russian oil facilities and a US blockade affecting Venezuela’s exports. Russia and Ukraine have exchanged allegations of attacks on civilians despite ongoing talks overseen by the US. Kyiv has intensified its strikes against Russian energy infrastructure to disrupt Moscow’s financing for its military campaign.
In a recent move, the US imposed sanctions on four companies and associated oil tankers operating in Venezuela’s oil sector, further pressuring Venezuelan President Nicolas Maduro. The US blockade is forcing state energy company PDVSA to find alternative solutions to avoid shutting down refining units due to building residual fuel inventories.
The oil market is expected to remain volatile, with short-term geopolitical risks and longer-term market fundamentals pointing towards oversupply. The Organization of the Petroleum Exporting Countries and its allies are set to meet virtually on January 4 to discuss production levels. Analysts anticipate that OPEC+ will continue to pause output hikes in the first quarter, which could impact oil prices.
The International Energy Agency predicts that the world will produce 3.84 million more barrels of oil daily than it uses next year, contributing to the oversupply concerns. Meanwhile, China is expected to continue building crude stockpiles in the first half of the year, providing a floor to oil prices. In the US, oil production reached a record high of 13.87 million barrels per day in October, according to the Energy Information Administration. As the oil market navigates these developments, 2026 is likely to be a significant year for assessing OPEC+ decisions and their impact on global oil supply.