Oil Flat As Global Tensions And Oversupply Concerns Escalate

Brent could trade at $55 for the first half of 2026, says analyst: File Image/Pixabay

An alleged drone attack by Ukraine on Russia president Vladimir Putin's residence in the northern part of the country continued to stoke traders' concerns about potential supply disruptions, offset somewhat by lingering worries over demand in 2026 - and as a result, oil prices on Tuesday were flat.

As of 6:18 GMT, Brent was up 3 cents at $61.97 per barrel, and West Texas Intermediate dipped 12 cents to $61.37.

Geopolitical tensions were augmented by a Saudi Arabia-led coalition on Tuesday carrying out an airstrike in the southern Yemeni port of Mukalla and then backing a call for United Arab Emirates forces to vacate Yemen within 24 hours.

Additionally, following reports Iran was developing chemical warheads, U.S. president Donald Trump said Washington would support another major strike on Tehran interests if circumstances warranted.

Phil Davis, founder of PSW Investments, remarked, "Just as the year is about to end, oil markets are violently repricing geopolitics."

Also on Tuesday, the U.S. Energy Information Administration issued a Christmas-delayed report showing that crude stocks rose by 400,000 barrels per day (bpd) to 424.8 million bpd during the week ended Dec. 19, following a 1.3 million barrel decrease the prior week.

It was unclear whether oil's recent price uptick was a nascent trend or just anomaly in an otherwise protracted downward trajectory; for his part, independent oil market analyst Gaurav Sharma told  media that despite the sudden geopolitical flare-ups, Brent's struggle to hold above $60 reflects a widening imbalance between supply and demand: "There is simply too much oil in the market."

Sharma added that during the first half of 2026, Brent could trade below $60 with a test of $55 possible, but prices may recover toward $60 in the second half provided the global economy avoids a sharper downturn.

In other oil news on Tuesday were reports that Venezuela's state-run Petroleos de Venezuela SA began shuttering wells in the Orinoco Belt due to the refiner running out of storage space; according to sources, PDVSA aims to reduce Orinoco Belt production by at least 25 percent to 500,000 barrels per day, in the face of Washington's blockade meant to financially pressure the nation into a regime change.