Geopolitical Fears Push Oil Higher as Peace Hopes Fade and Venezuela Tensions Rise

Oil prices edged higher as traders balanced the slow pace of negotiations between Russia and Ukraine with persistent concerns about global supply. Brent crude hovered near $63 per barrel, while West Texas Intermediate remained above $59, extending gains seen earlier in the week. The market’s upward bias largely stemmed from geopolitical uncertainty tied to the stalled diplomatic process in Eastern Europe and rising tensions between the United States and Venezuela.

Expectations for a quick peace agreement faded after discussions between a U.S. envoy and Russian President Vladimir Putin produced no significant progress, despite President Donald Trump describing the talks as “reasonably good.” With no clear path to a settlement and continued strikes on Russian energy infrastructure, traders judged that sanctions on Russian oil were unlikely to ease soon. A report on Wednesday indicated that Ukraine targeted the Druzhba pipeline in Russia’s Tambov region. Data from Kpler showed that Ukrainian drone attacks have evolved into a more organized campaign, reducing Russia’s refining throughput to roughly 5 million barrels per day from September to November—about 335,000 barrels per day below year-earlier levels. Analysts expect crude prices to remain confined to a narrow range as peace efforts continue without major breakthroughs.

In a separate development, President Trump reiterated that the United States intends to take direct action against drug cartels operating in Venezuela. The buildup of American military assets in the region has introduced an additional risk premium into crude markets, helping offset concerns that supplies may be more than sufficient. Gao Jian of Qisheng Futures Co. noted that the situation in Venezuela is adding a layer of caution for traders.

Still, underlying market fundamentals remain weak. According to government figures released Wednesday, U.S. crude inventories rose by 574,000 barrels last week, defying expectations for a draw. Stocks of gasoline and distillates also increased sharply, with gasoline supplies rising by 4.52 million barrels and distillates by 2.1 million barrels. The simultaneous rise in both crude and refined-product inventories suggests ongoing softness in U.S. fuel demand. Looking ahead, crude is poised for a yearly decline as OPEC+ gradually restores suspended output and other major producers expand their production. Saad Rahim, chief economist at Trafigura Group, commented that abundant supply means the “easiest direction for prices is likely lower.” Janet Hong, CEO of Hengli Petrochemical International Pte., expects China’s demand to remain muted until at least mid-2026. Fitch Ratings also trimmed its oil-price projections for 2025 through 2027, citing persistent oversupply and continued production growth forecast to outpace consumption.

A modest source of support for prices came from expectations that the Federal Reserve will cut interest rates at its upcoming meeting. Futures markets are currently assigning more than an 80% probability to a quarter-percentage-point rate reduction. These expectations held firm after a weaker-than-anticipated ADP employment report showed a decline of 32,000 jobs in the U.S. private sector in November.