Oil Prices Rise on Fed Rate-Cut Hopes as Geopolitical Risks Mount

Oil prices climbed on Thursday, with Brent settling at $63.26 and WTI at $59.67, driven by investor expectations that the U.S. Federal Reserve will cut interest rates, boosting economic activity and fuel demand. A weakening U.S. dollar—on track for its 10th straight day of losses—made crude more affordable for global buyers, further supporting prices. Geopolitical tensions added upward pressure, including escalating friction between the U.S. and Venezuela and stalled Ukraine peace talks, which dimmed hopes for restoring Russian oil flows. Ukraine’s continued drone attacks on Russian energy infrastructure have cut Russian refining throughput by 335,000 bpd year-on-year, intensifying market uncertainty. Meanwhile, U.S. crude inventories rose by 574,000 barrels, Saudi Arabia cut its Asian OSP to a five-year low of +$0.60, and Kazakhstan’s output fell 6% after a drone strike disrupted the CPC export terminal.

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OPEC Output Falls 30,000 bpd in November Despite Planned Production Increase

OPEC’s oil production slipped to 28.40 million bpd in November, down 30,000 bpd from October, despite an OPEC+ agreement calling for higher output. Five OPEC members—Algeria, Iraq, Kuwait, Saudi Arabia, and the UAE—were expected to increase supply by 85,000 bpd, but actual growth reached only 40,000 bpd due to compensation cuts and operational issues. Iraq’s exports fell because of pipeline maintenance, while Nigeria saw reduced shipments after a fire shut down the Yoho production platform. Wide discrepancies remain between OPEC-reported output and estimates from external agencies such as the IEA, which believes some members are producing more than officially stated. The report highlights how outages, capacity constraints, and required compensation cuts continue to hold OPEC output below target levels.

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Saudi Arabia Slashes January Arab Light Price to Asia to Five-Year Low Amid Supply Glut

Saudi Arabia has lowered its January Arab Light OSP to $0.60 per barrel above Oman/Dubai, the lowest level since January 2021 and down from $1 in December, reflecting growing signs of surplus in the global oil market. The price reduction follows a weakening in cash Dubai’s premium to swaps, which has averaged $0.70 in December compared with $0.90 in November. Rising supply from OPEC+ — which has increased output targets by 2.9 million bpd since April 2025, though eight members paused hikes for Q1 2026 — along with additional output from the US and Brazil, has intensified concerns about oversupply. OPEC’s latest outlook projects a small surplus of 20,000 bpd next year and has reduced its 2026 demand forecast for OPEC+ crude by 100,000 bpd. The lower Saudi OSP may stimulate extra buying from China, and it typically influences about 9 million bpd of crude pricing from Iran, Kuwait, and Iraq heading to Asia.

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U.S. Grants Limited Waiver Allowing Lukoil Gas Station Transactions Abroad Through April 2026

The U.S. Treasury issued a narrow waiver allowing transactions with about 2,000 Lukoil gas stations outside Russia through April 29, 2026, despite sanctions imposed in October. These sanctions—targeting Lukoil and Rosneft, Russia’s two largest oil companies—were enacted by President Trump due to their financial support for Moscow’s war in Ukraine. Lukoil’s foreign assets, valued at roughly $22 billion, have attracted substantial buyer interest since the sanctions were announced. The Treasury previously allowed discussions with Lukoil about asset purchases through December 13, though any actual deals will require separate approval. Lukoil’s global retail footprint includes 200 U.S. stations in New Jersey, Pennsylvania and New York, and significant networks in Turkey (~600 stations) and Romania (300+ stations).

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India’s Russian Oil Imports Dip to 32% Ahead of Putin–Modi Summit

India’s intake of Russian crude fell from 36% of 5 million bpd in October to 32% of 4.6 million bpd in November, driven by tightened U.S. sanctions on Rosneft and Lukoil. President Vladimir Putin’s visit to India, accompanied by senior executives from Gazprom and Rosneft, has raised expectations that the decline may reverse. Several Russian cargoes — including the EU-sanctioned 104,500-dwt Lumin and the 110,000-dwt Oceanid — are scheduled to discharge at Indian refineries such as Nayara Energy’s Vadinar plant and Reliance’s 62.8m-tonne/year Jamnagar refinery. Indian refiners, particularly Reliance, are said to be “recalibrating” their Russian crude purchases as they navigate sanctions pressure. The U.S. has been pushing India to reduce reliance on Russian oil, but Indian imports of U.S. crude also slipped from 365,000 bpd in October to 299,000 bpd in November.

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Kazakhstan’s Oil Output Drops 6% After Drone Damage Limits CPC Export Capacity

Kazakhstan’s oil and gas condensate output fell 6% in the first two days of December to 1.9 million bpd, after a Ukrainian drone attack damaged the Caspian Pipeline Consortium’s Black Sea loading terminal. The CPC pipeline, which handles over 80% of Kazakhstan’s exports and more than 1% of global supply, suspended operations and then resumed using only one of its usual two single-point moorings, with a third under maintenance. Despite government claims that one mooring is operating normally, reduced capacity is forcing Kazakhstan to divert more crude through the Baku-Tbilisi-Ceyhan (BTC) pipeline. Alternative routes via Novorossiysk, Ust-Luga, and the Druzhba pipeline offer lower margins and are constrained by Russia’s stretched infrastructure. One industry estimate suggests CPC’s reduced operation cuts loading capacity by 900,000 tons per week.

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Red Sea Tanker Traffic Rises Slowly, but Dark Fleet Still Dominates

Crude tanker transits in the Red Sea remain 35% below the 2023 average, while product tankers are 20% down, though both show improvement from last week’s deeper declines. Maritime Optima reports 122 tankers currently in the region, with 15 entering in the last two days, but 7 of these are sanctioned vessels or recently carried Russian oil. Notable dark-fleet ships include the 105,000-dwt Marathon and the 109,300-dwt Peace, which has a falsified Timor Leste registration. Despite a supposed Houthi halt to attacks in mid-November, ceasefire violations persist, creating uncertainty even as political leaders claim progress. BIMCO warns that a full reopening could cut crude and product tanker demand by 2%–3%, erasing expected 1%–2% growth next year, with analysts predicting normal traffic would not resume until late Q2 if attacks cease.

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Europe–West Africa MR Tanker Loop Emerges to Ease Vessel Oversupply

A sharp rise in MR tanker voyages from Europe to West Africa is helping absorb excess vessels as traditional Europe–US East Coast gasoline flows fall to one of their lowest levels since 2016. Strengthening US Gulf exports to Europe are adding more ships into the Atlantic, heightening the risk of an MR tonnage glut. West Africa–Europe return voyages hit their highest two-month total since January 2024, driven by operational issues at Nigeria’s Dangote refinery. These disruptions have pushed freight rates up to WS 235 in late October before easing. However, the trend may be temporary as Dangote plans to boost refining capacity to 1.4 million bpd by 2028, which could eliminate West Africa’s import needs.