Oil Prices Edge Higher at Start of 2026 as Geopolitical Tensions Offset Oversupply Concerns

BY COMFORT OGBONNA

Oil prices ticked up on the first trading day of 2026, recovering slightly after suffering their steepest annual decline since 2020, as renewed geopolitical tensions involving Russia, Ukraine, and Venezuela offered some near-term support to the market.

Brent crude futures rose 35 cents to $61.20 a barrel by 0409 GMT on Friday, while U.S. West Texas Intermediate crude gained 34 cents to trade at $57.76 a barrel. The modest gains followed a bruising 2025 for oil markets, which were weighed down by persistent oversupply worries, slowing global demand growth, and uncertainty surrounding trade tariffs.

Fresh concerns over supply disruptions emerged after Ukrainian drones reportedly targeted Russian oil facilities, underscoring the risks tied to the nearly four-year-old war between Moscow and Kyiv. Russia and Ukraine exchanged accusations of attacks on civilians on New Year’s Day, even as talks overseen by U.S. President Donald Trump continued in an effort to bring the prolonged conflict to an end. In recent months, Ukraine has intensified strikes on Russian energy infrastructure as part of a strategy aimed at weakening Moscow’s ability to finance its military campaign.

Additional pressure on global oil flows came from Washington’s latest actions against Venezuela. In a move to tighten the economic screws on President Nicolas Maduro, the Trump administration imposed sanctions on four companies and associated oil tankers accused of operating in Venezuela’s oil sector. The U.S. blockade is designed to prevent sanctioned vessels from entering or leaving Venezuelan ports, sharply restricting exports and forcing state-run energy firm PDVSA to adopt extreme measures to keep refineries running as residual fuel inventories build up.

Despite these geopolitical flashpoints, oil prices remain under strain from broader market fundamentals. Both Brent and WTI ended 2025 with losses of nearly 20%, marking their steepest annual drop since 2020. For Brent, it was the third consecutive year of declines, the longest losing streak on record. Analysts say the muted price reaction highlights the market’s struggle to balance short-term geopolitical risks against longer-term expectations of ample supply.

Market participants are now turning their attention to the upcoming OPEC+ meeting scheduled for January 4, where the producer group and its allies will decide on output policy for the months ahead. Analysts widely expect OPEC+ to maintain its pause on production increases during the first quarter, as it seeks to stabilize prices in an environment marked by rising supply from non-OPEC producers.

According to market analysts, prices are likely to remain range-bound in the near term, with WTI expected to trade between $55 and $65 per barrel in the first quarter. The year ahead is seen as a critical one for assessing how effectively OPEC+ can manage supply to counterbalance weak demand growth and rising output elsewhere. China’s continued build-up of crude stockpiles in the first half of the year is expected to provide some support and help set a floor under prices.

In the United States, oil production continues to surge. Output hit a record high of 13.87 million barrels per day in October, according to the Energy Information Administration. Recent data showed crude inventories declining, while gasoline and distillate stocks rose, reflecting strong refining activity. These trends underscore the challenge facing oil markets in 2026, as robust supply growth competes with geopolitical uncertainty to shape price direction.