Global oil markets witnessed a cautious uptick on the first trading day of 2026, following a year that marked the steepest annual decline since 2020. The marginal rise comes against a backdrop of escalating geopolitical tensions, including Ukrainian drone strikes targeting Russian energy infrastructure and a fresh wave of U.S. sanctions aimed at crippling Venezuela's oil exports.
Geopolitical Tensions Fuel Price Volatility
On Friday, Brent crude futures increased by 14 cents to reach $60.99 per barrel. Similarly, the U.S. benchmark, West Texas Intermediate (WTI) crude, saw an identical rise of 14 cents, trading at $57.56 a barrel. This slight rebound follows a tumultuous 2025 where both key benchmarks recorded an annual loss of nearly 20%, the most significant drop in five years.
The price movement is heavily influenced by ongoing conflict. Despite intensive talks overseen by U.S. President Donald Trump to end the nearly four-year-old war, Russia and Ukraine exchanged allegations of attacks on civilians on New Year's Day. In a strategic shift, Kyiv has intensified its campaign against Russian oil facilities in recent months, aiming to sever a critical source of funding for Moscow's military operations.
US Ramps Up Pressure on Venezuela's Oil Sector
Simultaneously, the Western hemisphere is seeing renewed pressure on oil flows. The Trump administration, in its latest move against the government of President Nicolas Maduro, imposed sanctions on four companies and their associated oil tankers for operating within Venezuela's oil sector. This blockade, enacted on Wednesday, is designed to prevent sanctioned vessels from entering or leaving Venezuelan ports.
The consequences are immediate for Venezuela's state energy giant, PDVSA. The company is being forced to seek extreme operational solutions to keep its refining units running. This is because the U.S. action is causing a build-up of residual fuel inventories, threatening a complete shutdown of critical infrastructure.
Market Overshadowed by Oversupply Concerns
Despite these geopolitical flashpoints, the overarching market sentiment in 2025 was dominated by worries about excess supply and the impact of tariffs. This led to the third consecutive year of losses for Brent crude, marking the longest losing streak ever recorded. The bearish trend was underpinned by robust production data from the United States.
According to the U.S. Energy Information Administration (EIA), American oil output hit a record high of 13.87 million barrels per day in October. In its latest weekly report, the EIA noted that while U.S. crude stocks fell, inventories of gasoline and distillates rose due to strong refining activity, painting a mixed picture for the world's largest oil consumer.
As 2026 begins, the oil market remains a tug-of-war between geopolitical risk premiums and fundamental concerns about oversupply. The actions in Ukraine and against Venezuela provide temporary support, but the record-breaking U.S. production continues to cast a long shadow over any sustained price recovery.
