The new year brought a tentative rebound for global oil markets, with prices inching higher on the first trading day of 2026. This modest gain follows a tumultuous 2025 that witnessed the steepest annual price decline since the pandemic year of 2020.
Geopolitical Tensions Fuel Early 2026 Price Rise
At 0146 GMT, Brent crude futures had risen by 14 cents to reach $60.99 a barrel. Similarly, the US benchmark, West Texas Intermediate (WTI) crude, gained 14 cents to trade at $57.56 a barrel. This upward nudge was primarily triggered by the resurfacing of fresh geopolitical risks that threaten global energy supplies.
The immediate catalysts are twofold. First, reports emerged of Ukrainian drone strikes targeting Russian oil facilities. Kyiv has intensified attacks on Russia's energy infrastructure in recent months, a strategy aimed at crippling Moscow's ability to finance its military operations in the ongoing conflict. Reuters reported that despite intensive talks overseen by US President Donald Trump to end the nearly four-year-old war, Russia and Ukraine traded accusations of attacks on civilians on New Year's Day.
Supply Concerns Amplified by US Sanctions on Venezuela
Adding further pressure to supply chains, the United States imposed new sanctions on Venezuela's oil sector on Wednesday. Washington targeted four companies and their associated oil tankers operating in the country. The objective of this US blockade is to prevent these sanctioned vessels from entering or leaving Venezuelan ports.
This move is forcing Venezuela's state-run energy firm, PDVSA, to adopt extreme measures. The company is struggling to avoid shutting down its refining units as inventories of residual fuel continue to pile up due to export restrictions.
2025: A Year of Significant Losses for Oil
Despite the early 2026 gains, the broader market sentiment remains under significant pressure. This is because the oil complex is recovering from a brutal 2025. Both Brent and WTI crude benchmarks ended 2025 with losses of nearly 20%, marking their most severe annual fall since 2020.
The dominant factors that drove prices down last year were persistent worries about oversupply in the market and broader concerns about global tariffs. These economic headwinds ultimately outweighed the geopolitical risk premium that typically supports oil prices. Notably, 2025 marked the third consecutive year of decline for Brent crude, cementing its longest losing streak on record.
As trading for 2026 begins, the market finds itself at a crossroads, delicately balancing between fresh geopolitical supply threats and the overarching bearish fundamentals of oversupply and demand concerns that defined the previous year.
