Oil prices moved lower on Tuesday as concerns about oversupply in 2026 overshadowed worries about Russian oil remaining under sanctions. Ongoing talks aimed at ending the Ukraine conflict have not produced results, keeping uncertainty elevated.
Brent crude fell 33 cents, or 0.5%, to $63.04 a barrel by 07:30 GMT. West Texas Intermediate (WTI) slipped 28 cents, or 0.5%, to $58.56.
Both benchmarks had risen 1.3% on Monday after fading optimism over a Russia-Ukraine peace deal reduced expectations of unrestricted Russian crude and fuel shipments. Western sanctions continue to limit the flow of Russian energy exports.
Despite these concerns, analysts expect the crude market to loosen next year. Several forecasts point to global supply growth outpacing demand increases in 2026.
Priyanka Sachdeva, senior market analyst at Phillip Nova, said crude remains vulnerable in the short term, with oversupply posing the biggest risk.
New Western sanctions on Russian producers Rosneft and Lukoil, along with restrictions on oil products refined from Russian crude, have also led some Indian refiners—especially Reliance—to scale back purchases of Russian oil. With fewer buyers, Russia is seeking to boost exports to China.
Russian Deputy Prime Minister Alexander Novak noted on Tuesday that Moscow and Beijing are discussing ways to expand Russian oil shipments to China.
Still, analysts remain focused on the possibility of a substantial surplus next year. Deutsche Bank expects at least a 2 million barrels-per-day oversupply in 2026 and sees no clear return to deficits even through 2027. Analyst Michael Hsueh said the outlook for next year “remains a bearish one.”
This expectation of softer market conditions is outweighing the lack of progress in Ukraine peace negotiations, which had offered some price support. Any resolution to the conflict could lead to sanctions being lifted, allowing more Russian supply to return to global markets.
Oil prices are also finding limited support from rising expectations of a U.S. interest rate cut at the Federal Reserve’s December 9–10 meeting. Fed officials have signaled backing for a reduction, which could boost economic activity and strengthen oil demand.
Sachdeva noted that the oil market is currently caught between oversupply concerns and hopes for stronger demand driven by easier monetary policy.
