Oil prices climbed on Friday alongside broader equity gains, extending a two-day rally even as traders weighed the conflicting forces of geopolitical risk and an increasingly evident global supply overhang. West Texas Intermediate (WTI) pushed above $60 a barrel, reflecting a market still pricing in a war-related risk premium despite mounting evidence of surplus barrels accumulating worldwide. With investors attuned to Ukraine–Russia dynamics, shifting sanctions expectations, and producer pricing strategies, crude continues to navigate a complex macroeconomic landscape.

Geopolitical Tensions Keep a Risk Premium in Place

The prospect of progress in Ukraine cease-fire negotiations helped stabilize broader markets, but oil traders remained cautious. Ukrainian negotiators met for a new round of discussions in Florida, though the Kremlin signaled dissatisfaction with key elements of the US-supported proposal. Reports of a Ukrainian attack on Russia’s Syzran refinery and the Temryuk seaport underscored the persistent fragility of the situation, reducing hopes that a diplomatic breakthrough could unlock additional Russian supply in the near term.

The U.S. is also pressuring European allies to block a proposal that would leverage frozen Russian assets to fund a large-scale loan for Ukraine—another reminder that geopolitical tensions continue to reverberate across energy markets. Each setback in negotiations reinforces the likelihood that sanctions will remain intact, limiting Russian output flows and keeping a floor under oil prices.

Against this backdrop, WTI’s move above its 50-day moving average highlights renewed technical support, suggesting bullish traders are cautiously re-entering the market.

Growing Global Surplus Challenges the Upside

Offsetting geopolitical concerns is a widening global oversupply that continues to place downward pressure on crude benchmarks. Saudi Aramco announced it will cut the selling price of its Arab Light crude for January to its lowest level since 2021, signaling that demand softness across Asia and Europe may be deeper than anticipated. Canadian crude prices have also retreated sharply, contributing to a broader narrative of plentiful supply.

For traders, the disconnect between rising geopolitical risk and weakening fundamentals presents a challenge. Even if war-related uncertainties offer temporary support to prices, sustained oversupply threatens to cap rallies unless demand indicators strengthen meaningfully.

Russia–India Energy Dynamics in Focus

A key subplot for oil markets is unfolding in New Delhi, where Vladimir Putin arrived for his first state visit to India since the full-scale invasion of Ukraine. India has become one of Russia’s most important crude buyers, reshaping global energy flows since 2022. While geopolitical pressure from Western governments persists, India reiterated that its purchasing decisions remain commercially driven.

Any shift—either toward higher Russian volumes or a redistribution of imports among Middle Eastern suppliers—could influence market balances heading into early 2026. For now, India’s stance reinforces expectations that Russian crude will retain significant access to global markets despite sanctions, contributing to the overall surplus narrative.

Outlook: Watching Supply Management, Cease-Fire Progress, and Technical Levels

Oil’s near-term trajectory will depend on whether geopolitical risks outweigh supply fundamentals. If cease-fire negotiations gain traction, markets could see downward pressure as traders anticipate potential increases in Russian exports. Conversely, prolonged conflict will keep a geopolitical premium embedded in prices, even as surplus conditions persist.

Traders will also monitor OPEC+ pricing strategies, refining disruptions in the Black Sea region, and broader risk sentiment across equities. With WTI hovering above key technical thresholds, momentum remains fragile and highly dependent on developments in both diplomacy and supply management.