Oil Prices Slip as Fears of Oversupply Outweigh Geopolitical Tensions

Mohammedia – Oil prices drifted lower yesterday as renewed concerns about a growing supply glut overshadowed geopolitical risks that have dominated market sentiment in recent months.

Traders largely shrugged off political rumblings linked to the war in Ukraine, focusing instead on the widening imbalance between global supply and demand.

Benchmark Brent crude for February delivery slipped 0.88% to $61.94 per barrel, while West Texas Intermediate (WTI) for January shed 1.07% to $58.25.

Both benchmarks continued the downward trajectory seen in recent weeks, reflecting persistent doubt about the market’s ability to absorb increasing volumes of crude.

According to analysts, the downturn has been fuelled primarily by supply-side pressures. “The market continues to be under pressure due to rising output,” said Andy Lipow of Lipow Oil Associates, pointing particularly to the planned production increases announced by OPEC+ earlier this year.

The alliance, which began raising quotas in April, has contributed significantly to the swelling global oil supply and the resulting price softening.

Supply growth accelerates across producers

Despite the mounting concerns, OPEC+ signalled during its latest meeting that it intends to pause further production hikes during the first quarter of 2026.

The group cited seasonal factors, typically characterised by weaker consumption, as a reason for holding output steady. But analysts say the temporary reprieve is unlikely to reverse the broader trajectory unless global demand surprises to the upside.

Beyond OPEC+, record output levels in North America continue to weigh heavily on prices. The United States and Canada have both posted historic highs in crude production, strengthening their position as key suppliers in the global energy landscape.

Meanwhile, output gains in Brazil, Guyana, and Argentina are adding to the pressure, creating what some analysts warn could become a multi-quarter oversupply cycle.

These supply dynamics have increasingly overshadowed political developments that would normally inject volatility into crude markets.

Ukrainian President Volodymyr Zelensky announced plans to send Washington a revised version of former U.S. President Donald Trump’s proposal aimed at resolving the conflict with Russia.

The diplomatic manoeuvring followed Zelensky’s meetings this week with European leaders in London and Brussels, where support for Kyiv was reaffirmed.

This geopolitical backdrop intensified after Trump threatened secondary sanctions on countries trading with Russian energy giants Lukoil and Rosneft as part of a push to bring Moscow to the negotiating table. But traders appear unconvinced that these measures will meaningfully tighten supply.

“Russia has done an extraordinary job circumventing the sanctions imposed by the U.S. and the EU,” Lipow noted.

A flood of discounted Russian crude remains available on the market, he added, further reinforcing bearish price pressures.