Oil Prices Slip Again As Oversupply Fears Rise And Ukraine Talks Drag On
While sanctions on Russian exports remain firmly in place, expectations of looser supply-demand balances next year are shaping a more bearish outlook for crude.
Oil prices drifted lower on Tuesday, extending a cautious mood across global energy markets as traders weighed growing concerns of a supply surplus against ongoing geopolitical uncertainty.
While sanctions on Russian exports remain firmly in place, expectations of looser supply-demand balances next year are shaping a more bearish outlook for crude.
Brent crude fell by 27 cents to settle at $63.10 a barrel, while West Texas Intermediate (WTI) slipped 23 cents to $58.61 during early Asian trading hours, reported Reuters.
The modest decline follows a 1.3 per cent rise on Monday, when fading hopes of a breakthrough in negotiations to end the Russia-Ukraine war temporarily buoyed prices.
Despite the geopolitical backdrop, analysts say the momentum remains fragile. Sanctions on Russian crude and refined products continue to disrupt flows, yet forecasts suggest the real driver of market sentiment is a looming imbalance in 2026.
"In the short-term, the key risk is oversupply and current price levels seem vulnerable," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Russian Crude: Sanctions, Shrinking Buyers and a Pivot to China
Fresh sanctions on oil majors Rosneft and Lukoil have complicated Moscow’s ability to place its barrels, particularly after Europe tightened rules on purchasing refined products made from Russian crude. The restrictions have squeezed demand from some Indian refiners, including private-sector giant Reliance, which has reportedly scaled back purchases.
With fewer willing buyers, Russia is increasingly turning eastwards. Alexander Novak, Russia’s Deputy Prime Minister, told a China–Russia business forum in Beijing that Moscow and Beijing have been exploring ways to deepen their energy partnership and expand oil shipments to China.
This pivot underscores how Russia is reconfiguring its energy export strategy amid Western pressure, yet even these new avenues may not be enough to offset a globally softer demand outlook.
Analysts Warn of a Growing Surplus
Across major financial institutions, the consensus is shifting towards a view that crude markets may be heading for a prolonged period of oversupply. A note from Deutsche Bank on Monday projected a 2026 surplus of at least 2 million barrels per day, with "no clear path back to deficits even by 2027," according to analyst Michael Hsueh.
Such forecasts have overshadowed the lack of progress in the Ukraine peace negotiations. If talks eventually succeed, the lifting of sanctions could flood the market with previously restricted Russian supply, adding further strain to already loose fundamentals.
Still, not all sentiment is bearish. Oil markets have found pockets of support amid increased expectations of a US interest-rate cut at the Federal Reserve’s December policy meeting. Several Fed officials have signalled their backing for looser monetary policy, sparking optimism that cheaper borrowing could stimulate economic activity and, in turn, energy demand.
"The oil market is in a tug-of-war between a caution-driven supply overhang and demand hopes predicated on easier monetary policy," Sachdeva noted.
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