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Oil prices retreated on Tuesday as growing expectations of an oversupplied market in 2026 outweighed concerns that Russian shipments may remain restricted due to stalled peace talks over the Ukraine conflict.
Brent crude slipped 33 cents (0.5%) to $63.04 per barrel by 07:30 GMT, while West Texas Intermediate (WTI) fell 28 cents (0.5%) to $58.56.
This followed a 1.3% gain in both benchmarks on Monday, driven by waning optimism over a Russia-Ukraine peace agreement that could lift Western sanctions and restore full flows of Russian crude and refined products.
Despite the geopolitical risk surrounding Russian exports, the broader outlook for next year points to a looser supply–demand balance, with multiple forecasts indicating that global oil supply growth will outpace demand in 2026.
New sanctions on Russian oil majors Rosneft and Lukoil, along with restrictions on selling refined products made from Russian crude into Europe, have prompted some Indian refiners—particularly private-sector giant Reliance—to scale back purchases. With fewer buyers available, Russia is shifting its focus toward expanding exports to China.
On Tuesday, Russian Deputy Prime Minister Alexander Novak stated during a China–Russia business forum in Beijing that both countries were discussing additional avenues to boost Russian oil flows to China.
Still, analysts remain concentrated on the wider structural imbalance expected in the coming years.
Deutsche Bank projects a 2026 surplus of at least 2 million barrels per day, with no clear return to market deficits even by 2027, according to a note released Monday.
The anticipation of a softer supply–demand environment is outweighing the price-supportive effect of unresolved Russia-Ukraine peace negotiations. A breakthrough deal could potentially lift sanctions on Moscow, releasing previously restricted barrels into the global market.
However, some support for oil remains as expectations rise for a U.S. interest rate cut at the Federal Reserve’s December 9–10 policy meeting. Several Fed officials have signaled openness to easing policy.
Lower interest rates could help stimulate economic activity and bolster future oil demand.
