Oil Futures Down 4% on Week Amid Oversupply Fears


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude futures tumbled 4% on the week at the close of 
Friday's (12/12) trading, amid fears of oversupply, driven by the potential 
lifting of sanctions on Russian oil and forecasts that global production next 
year will outpace demand.

   Sanctions on Russian oil are expected to be lifted if Russia and Ukraine 
agree to a U.S. initiative to end the more than three-year war between them. 
Ukrainian President Volodymyr Zelensky said Thursday (12/11) he might ask his 
country to vote on whether to cede its Donbas region to Russia, raising hopes 
that a solution might be imminent in the near four-year long conflict. 

   Millions of barrels belonging to Russia's Rosneft and Lukoil are currently 
at sea, unable to reach refineries in India and China due to Ukraine-related 
sanctions imposed by the U.S. and Europe. The oil now on water, along with more 
supply from Russia after the end of the Ukraine war, could add significantly to 
the global crude glut, traders said.

   The International Energy Agency (IEA) said in its December report this week 
that despite an improved macroeconomic outlook and the sanctions on Russian and 
Venezuelan oil, it still expected a worldwide surplus of 3.84 million bpd for 
2026. That was only slightly lower than the 4.09 million bpd the agency 
originally forecast for next year in its November report.

   The Organization of the Petroleum Exporting Countries' forecast of higher 
oil demand in 2026 -- some 500,000 bpd above the IEA's prediction, at 1.38 
million bpd -- have done little for market sentiment.

   U.S. sanctions on Venezuelan oil have also barely boosted the geopolitical 
risk premium in crude as the Trump administration carries out a maximum 
pressure campaign against the regime of President Nicolas Maduro.  The 
Treasury's Office of Foreign Assets Control announced on Thursday (12/11) fresh 
sanctions on three of Maduro nephews, along with a businessman and six shipping 
companies and their assets. That was after U.S. troops seized earlier this week 
a Venezuelan oil cargo.

   The NYMEX WTI futures contract for January delivery settled Friday's session 
down $0.16 at $57.44 bbl, down 4.1% on the week. It hit a two month-low of 
$57.04 on Thursday.

   ICE Brent for February shipment slid $0.17 bbl to $61.11 bbl, registering a 
two-month bottom at $60.79 in the prior session.

   Downstream, RBOB futures contract for January delivery slipped $0.0070 to 
$1.7528 gallon. ULSD futures for delivery in January dipped $0.0273 to $2.2016 
gallon.




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