The oil market depreciated by more than 2 per cent on Friday as investors weighed a looming global supply glut, while also keeping an eye on a potential Ukraine peace deal.
Brent crude futures lost $1.60 or 2.57 per cent to trade at $60.64 per barrel and the US West Texas Intermediate (WTI) crude futures crumbled by $1.61 or 2.76 per cent to $56.74 a barrel.
The global oil supply next year will exceed demand by 3.84 million barrels per day, according to figures from the International Energy Administration (IEA) in its December oil market report.
Supply rose sharply this year boosted by output hikes from the Organization of the Petroleum Exporting Countries and allies (OPEC+) as well as growth in the United States and other producers. The group also paused output increases for the first quarter of 2026.
Meanwhile, OPEC kept its global demand growth forecast for year next unchanged in its monthly report, with its data indicating that world oil supply will match demand closely in 2026, in contrast to the IEA’s view.
While supply disruptions have helped oil prices rebound in recent sessions from their near five-year low, they are on track for their steepest annual decline since 2020. Brent and WTI are down 19 per cent and 21 per cent respectively on the year, as rising crude output caused concerns of an oil glut heading into next year.
Investors are watching for developments in the Russia-Ukraine peace process ahead of talks this weekend between Ukrainian President Volodymyr Zelenskiy and US President Donald Trump.
They will be focusing on the possible impact on future oil prices as a peace agreement could lead to the removal of international sanctions against Russia’s oil sector.
The Ukrainian president has said he would be willing to call a referendum on an agreed peace framework if Russia agrees to a ceasefire.
In Venezuela, the White House ordered the US military forces to focus on a “quarantine” of Venezuelan oil for at least the next two months, indicating the Trump administration is currently more interested in using economic rather than military means to pressure the South American OPEC member.
During the week, the American Petroleum Institute (API) estimated that crude oil inventories in the United States saw a build of 2.4 million barrels in the week ending December 19. Crude oil inventories data from the Energy Information Administration (EIA) will be released next week due to the Christmas holidays.