Oil prices fell as projected 2026 surplus outweighs geopolitical risk premiums

Oil prices settled more than 2% lower on Friday, as investors weighed a looming global supply glut against the diminishing returns of geopolitical risk premiums, with markets eyeing a potential breakthrough in Ukraine peace talks.

Brent crude futures settled down $1.60, or 2.57%, to $60.64 per barrel.

WTI crude settled down $1.61, or 2.76%, to $56.74. 

The retreat brings the benchmarks to an annual decline of 19% and 21%, respectively—the steepest yearly drop since 2020—driven by persistent concerns that rising output will overwhelm global consumption.

According to the IEA’s December report, global oil supply is forecast to exceed demand by 3.84 million barrels per day (bpd) next year. While localised supply disruptions provided temporary support earlier in December, analysts noted they have failed to alter the fundamental oversupply trajectory that continues to weigh on long-term sentiment.

Market participants are now fixated on the diplomatic corridor between Kyiv, Washington, and Moscow. Ukrainian President Volodymyr Zelenskiy is set to meet with US President Donald Trump in Florida this Sunday to discuss a 20-point peace framework and security guarantees. A potential de-escalation or ceasefire raises the prospect of an eventual rollback of international sanctions on Russia’s oil sector, which would reintroduce significant volumes to an already saturated market. 

Written by: Aiman Haikal