Oil prices extended their recovery on Thursday, supported by escalating geopolitical tensions and signs of tightening U.S. crude inventories, even as the broader market remains weighed down by concerns over oversupply and softening demand. West Texas Intermediate (WTI) crude futures climbed above $56 per barrel, marking a continued rebound from levels near a five-year low earlier this month.

WTI rose to $56.55 per barrel, up 1.10% on the day, as traders reacted to a sharp shift in U.S. policy toward sanctioned oil flows and renewed uncertainty around global energy supply routes. Despite the recent gains, crude prices remain under pressure, down 4.55% over the past month and nearly 18.5% lower year-on-year, highlighting the fragile nature of the recovery.

Venezuela and Russia Add Geopolitical Support

The latest upside move was driven primarily by geopolitical developments. The United States ordered a full shutdown of maritime traffic involving sanctioned Venezuelan oil tankers, following last week’s seizure of a blacklisted vessel off Venezuela’s coast. The move has heightened concerns that enforcement actions could disrupt already constrained flows of discounted barrels into global markets.

At the same time, Washington is signaling a tougher stance toward Russia’s energy sector, as part of broader efforts to pressure Moscow amid negotiations surrounding the war in Ukraine. While any easing of sanctions on Russian oil had previously weighed on prices, the prospect of stricter measures has reintroduced a geopolitical risk premium, even if temporarily.

Analysts caution, however, that Venezuela’s production volumes remain relatively modest on a global scale, limiting the long-term price impact unless broader supply disruptions materialize.

Inventory Data Offers Additional Support

Fundamentals provided further backing to prices. Data from the U.S. Energy Information Administration (EIA) showed that crude inventories fell by 1.27 million barrels last week, exceeding expectations for a 1.1 million-barrel draw and marking the second consecutive weekly decline. Stocks at the Cushing, Oklahoma delivery hub recorded their largest drop in nearly two months, a development closely watched by futures traders.

However, the bullish signal was partially offset by increases in gasoline and distillate inventories, suggesting that end-user demand remains uneven, particularly as economic growth moderates across major consuming regions.

Structural Headwinds Still Dominate the Outlook

Despite the recent rebound, oil continues to face strong structural headwinds. Global supply remains ample as OPEC+ gradually restores capacity and non-OPEC producers maintain elevated output. Meanwhile, early signs of demand fatigue persist across China, the United States, and parts of Europe, reinforcing expectations that supply growth will continue to outpace consumption into early 2026.

These dynamics have left oil on track for its worst annual performance in several years, with prices far below the historic highs seen during periods of acute supply stress.

Looking Ahead

Markets will now focus on further developments surrounding U.S. sanctions policy, Russia–Ukraine negotiations, and upcoming inventory data for clues on whether oil’s rebound can be sustained. Without a meaningful shift in the global supply-demand balance, analysts warn that geopolitical support alone may not be enough to drive a durable recovery.