Week in Review – Crude Prices Teeter $56 as Oil Glut Projections Offset Geopolitical Risk

Petroleum markets are closing the week lower but are trading nearly 50 cents higher this morning ahead of the January 2026 NYMEX WTI contract expiry and lingering geopolitical uncertainty. However, these gains appear technical in nature rather than a shift in underlying fundamentals, and have done little to alter the broader downward trend that has defined much of the week.

Despite the late-week uptick, crude benchmarks are still on track to post a second consecutive weekly decline, with Brent and WTI down roughly 2% week over week. Strong refinery output, healthy inventory levels, and persistent expectations of a global oil surplus in 2026 continue to cap upside potential. With rising production from OPEC+, the United States, and other non-OPEC suppliers expected to keep markets well supplied, rallies remain difficult to sustain, reinforcing the prevailing bearish sentiment.

Geopolitical developments added complexity but did not materially shift sentiment. While uncertainty around enforcement of U.S. restrictions tempered risk premiums, Venezuela authorized two very large crude carriers to sail to China, which are only the second and third such shipments since a U.S.-seized cargo last week, ultimately easing immediate supply concerns. Venezuela produces roughly 1% of global oil supply, and markets continue to view available barrels as sufficient to absorb potential disruptions.

Russia-related risks also remained in focus. The UK imposed new sanctions on three smaller Russian oil producers, while reports indicated the U.S. may be preparing an additional round of sanctions should Russia fail to agree to a peace deal with Ukraine. At the same time, optimism around a potential U.S.-led Russia-Ukraine peace agreement reduced near-term supply risk, contributing to subdued price reactions. Russian President Vladimir Putin also warned of risks associated with reserves held in the European Union by major oil-producing nations, adding to the broader geopolitical backdrop.

On the supply side, Saudi Arabia's crude exports climbed to a two-and-a-half-year high of 7.1 Mbpd in October, reinforcing concerns about near-term oversupply. U.S. refinery utilization remained elevated in the mid-90% range, supporting strong product output and continued inventory builds.

Looking ahead, refinery utilization is expected to ease into the low-90% range as planned maintenance begins in January. While maintenance is not expected to be heavy, structural capacity constraints persist, including the planned closure of Valero's Benicia refinery in April. Seasonally, winter weather will continue to influence diesel pricing over the coming months, even as near-term forecasts suggest a brief warming trend. For now, markets remain anchored by oversupply expectations, with geopolitical risk providing only temporary support.

Prices in Review

Crude prices trended lower this week, reflecting continued bearish sentiment. Crude opened the week at $57.50 on Monday before sliding to $56.68 on Tuesday. On Wednesday, prices reached the weekly low of $55.23. Prices increased on Thursday, climbing to $56.90, but failed to hold those gains, with crude settling at $56.03 on Friday. Overall, crude prices declined by $1.47 over the course of the week, representing a 2.56% decrease.

Diesel prices decreased overall this week, opening the week at $2.2057 on Monday before easing to $2.1783 on Tuesday. Diesel fell to a weekly low of $2.1313 on Wednesday and increased on Thursday, climbing to $2.1806, with prices settling at $2.1360 on Friday. Overall, diesel prices declined by 6.97 cents week-over-week, representing a 3.16% decrease.

Gasoline prices moved lower overall this week, opening the week at $1.7580 on Monday before sliding to $1.7312 on Tuesday. Prices fell to a weekly low of $1.6833 on Wednesday, and increased on Thursday, climbing to $1.7136, but failed to hold those gains. Overall, gasoline prices declined by 6.16 cents week-over-week, representing a 3.50% decrease.