WTI crude oil futures held close to $57.9 per barrel on Tuesday, consolidating after four consecutive sessions of gains driven by heightened geopolitical tensions. While traders remain alert to potential supply disruptions linked to Venezuela and Russia, the market continues to balance these risks against a growing consensus that global oil supply will outpace demand into 2026. The result has been a cautious equilibrium, with prices supported in the short term but still on track for a notable annual decline.

Venezuela Tensions Add a Risk Premium

Geopolitical developments in Latin America have been a focal point for energy markets this week. President Donald Trump said the United States is actively pursuing another oil tanker off the coast of Venezuela and will retain both the oil cargo and the two vessels seized in recent operations. While Venezuelan crude exports account for less than 1% of global oil supply, they remain a crucial revenue stream for President Nicolás Maduro’s government.

For traders, the importance lies less in the absolute supply impact and more in the precedent such actions set. Aggressive enforcement increases uncertainty around shipping routes, insurance costs, and compliance risks, all of which tend to inject a geopolitical premium into oil prices. Even modest disruptions can have outsized psychological effects in a market that has become highly sensitive to political signals.

Russia-Ukraine Conflict Keeps Energy Risks Elevated

In Europe, the Russia-Ukraine conflict continues to shape the risk landscape. Ukrainian forces have stepped up strikes on Russian energy infrastructure, with the latest attacks damaging vessels and port facilities along the Black Sea coast — a strategic artery for Russian energy exports. While Russian oil flows have proven resilient despite sanctions and military disruptions, repeated attacks raise concerns about logistical bottlenecks and export delays.

These developments have helped underpin oil prices in recent sessions, particularly as traders weigh the possibility of sudden supply interruptions against an otherwise well-supplied market. However, the impact remains largely precautionary, as global benchmarks have yet to reflect a material tightening in physical availability.

Oversupply Expectations Limit the Upside

Despite geopolitical support, crude oil remains under pressure from broader fundamentals. Prices are still down more than 17% year-on-year, reflecting expectations of a swelling supply surplus. Non-OPEC producers continue to ramp up output, while OPEC+ has gradually restored curtailed capacity. At the same time, demand growth has shown signs of slowing across major economies, including China, the United States, and parts of Europe.

This structural backdrop has kept investors cautious, with rallies increasingly viewed as opportunities to rebalance exposure rather than signals of a sustained bull market. From a risk-management perspective, many market participants are reluctant to chase prices higher without clearer evidence of tightening inventories or stronger end-user demand.

Looking Ahead

As 2025 draws to a close, oil markets remain caught between geopolitics and fundamentals. Short-term price support is likely to persist as long as tensions around Venezuela and the Black Sea remain elevated. However, unless disruptions translate into sustained supply losses, the prevailing surplus narrative is expected to dominate into 2026. Traders will closely monitor inventory data, OPEC+ policy signals, and diplomatic developments for clues on whether oil can break out of its current range or remain capped by structural headwinds.