Oil Falls as Peace-Talk Optimism and Rising U.S. Fuel Stocks Weigh on Market

Oil prices declined, with Brent settling at $61.28 and WTI at $57.60, as investors focused on progress in Russia-Ukraine peace talks and rising U.S. gasoline and diesel inventories. U.S. data showed both gasoline and distillate stocks rose by about 2.5 million barrels, pressuring refining margins and weakening crude demand. Hopes for a peace agreement between Russia and Ukraine, alongside reports of Ukraine striking a Russian Caspian oil rig, added volatility but ultimately pushed prices lower. The market also reacted to the U.S. seizure of a Venezuelan tanker and reports that Asian buyers are demanding steep discounts on Venezuelan crude amid growing sanctioned supply from Russia and Iran. Meanwhile, the IEA trimmed its 2026 supply growth outlook while boosting demand forecasts, whereas OPEC left its projections for 2025–2026 unchanged.

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US Poised for More Tanker Seizures Off Venezuela as Crackdown on Shadow Fleet Expands

The United States is preparing to seize additional tankers carrying Venezuelan oil after intercepting its first vessel this week, escalating pressure on President Nicolas Maduro amid a major military buildup in the Caribbean. The move has alarmed shipowners and operators, many of whom are reconsidering planned sailings from Venezuela as Washington compiles a target list of sanctioned vessels tied to Venezuela, Iran, and Russia. The seizure of the tanker Skipper has already caused at least one shipper to halt three newly loaded cargoes totaling nearly 6 million barrels of Merey crude. US forces are actively monitoring tankers in Venezuelan waters and plan to act once vessels enter international waters, though the condition and insurance status of many shadow-fleet ships complicate port arrangements for seized cargoes. While Venezuela has condemned the actions as “international piracy,” legal experts say the seizures fall within US sanctions enforcement and do not meet the legal definition of piracy.

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Ukraine Strikes Russian Caspian Oil Platform for First Time, Halting 120,000-bpd Output

Ukraine used aerial drones to strike Russia’s Filanovsky oil platform in the Caspian Sea for the first time, stopping production across more than 20 wells at a site that normally produces about 120,000 bpd. The attack signals a further escalation in Kyiv’s efforts to disrupt Russian oil and gas infrastructure, which has already included numerous strikes on refineries and unregulated tankers. The Caspian platform, located over 700 km from Ukraine’s nearest border, was hit by at least four drones, according to Ukraine’s Security Service. Ukraine has also intensified attacks on Russian-linked tankers in the Black Sea and beyond, with at least three vessels struck in the past two weeks and seven tanker explosions reported since December 2024. Russia has accused Ukraine of piracy and threatened to cut off Kyiv’s maritime access in retaliation.

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IEA Cuts 2026 Oil Glut Outlook as Demand Strengthens and Sanctions Weigh on Supply

The International Energy Agency (IEA) has reduced its forecast for the 2026 global oil glut for the first time since May, citing stronger-than-expected demand and weaker supply from sanctioned nations like Russia and Venezuela. The projected surplus now stands at 3.84 million bpd, down from 4.09 million bpd in November, though still representing nearly 4% of global demand. Demand estimates for both 2025 and 2026 were revised upward due to improving economic conditions, lower oil prices, and eased tariff concerns, with most demand growth coming from non-OECD countries. On the supply side, the IEA trimmed its outlook as sanctions erode Russian and Venezuelan exports, while OPEC+ has paused output increases for early 2026. Despite the IEA’s glut forecast, OPEC’s own report anticipates a more balanced market next year, highlighting continued divergence between the two agencies.

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Kazakhstan Cuts 2026 Oil Output Plans After Drone Damage to Key Export Terminal

Kazakhstan will lower its 2026 oil production plans due to major scheduled maintenance at the Tengiz, Karachaganak, and Kashagan fields, as well as severe damage from a Ukrainian drone strike on the Caspian Pipeline Consortium (CPC) terminal. The attack damaged SPM-2 with a 3m × 2.5m hole, reducing CPC’s exporting capacity and forcing Kazakhstan—normally producing ~2 million bpd and exporting 68.6 million tons last year—to divert crude through alternative routes, including China. CPC normally handles 1% of global supply and 80% of Kazakh exports, but only SPM-1 is currently operational, while SPM-3 remains under maintenance and shipments are expected to fall to ~68 million tons this year from a planned 72 million tons. 

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US Extends Deadline for Western Buyers to Acquire Lukoil’s Overseas Assets

The US government extended the deadline for Western buyers to negotiate the purchase of Lukoil’s sanctioned overseas assets from 13 December to 17 January. Lukoil, which owns 75% of Iraq’s West Qurna 2 oilfield capable of producing about 470,000 bpd (roughly 0.5% of global output), has been seeking buyers after being blacklisted by the US. Iraq’s halt of cash and crude payments led Lukoil to declare force majeure, and Somo cancelled three VLCC crude shipments scheduled for November, affecting regional tanker demand. Reuters estimates Lukoil’s overseas assets to be worth $22 billion, and major players such as ExxonMobil, Carlyle Group and Chevron have evaluated bids, though Gunvor withdrew after US criticism. US investment bank Xtellus Partners has proposed directing sale proceeds to compensate Western investors who lost Lukoil share value after Russia’s invasion of Ukraine.

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Trump Peace Plan Proposes Restoring Russian Energy to Europe and Major U.S. Investment in Russia

President Donald Trump’s Ukraine peace plan includes proposals for restoring Russian oil and gas flows to Europe and enabling major U.S. investment in Russian energy and rare-earth sectors, according to documents reviewed by the Wall Street Journal. The plan also envisions allowing U.S. financial firms to use $200 billion in frozen Russian sovereign assets to fund Ukrainian reconstruction projects, including a large data center powered by the Russian-controlled Zaporizhzhia nuclear plant. U.S. companies would gain access to Russian strategic industries such as Arctic oil drilling and rare-earth extraction. European officials, cited anonymously, likened the scale and geopolitical ambition of these proposed U.S.–Russia energy deals to an economic version of the 1945 Yalta Conference. The proposals were delivered to European governments in recent weeks as part of broader efforts to outline a negotiated settlement to the war Russia launched in 2022.

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Equinor to Invest $400 Million to Expand Johan Castberg Output

Equinor and its partners will invest 4 billion kroner ($400 million) to develop the Isflak discovery and add about 46 million barrels to the Johan Castberg field in the Barents Sea. The project aims to extend plateau production, with startup expected in late 2028. Equinor sees broader potential to add 250–550 million recoverable barrels from similar nearby discoveries, backed by plans for six new wells and ongoing exploration. Johan Castberg, which began production in March, is already delivering 220,000 barrels per day and has significantly boosted Norway’s overall output. As part of its long-term strategy, Equinor plans to spend roughly $60 billion annually over the next decade to drill 250 exploration wells and develop 75 subsea fields to maintain production levels through 2035.

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World’s Largest VLCC Owner Predicts Even Higher Tanker Rates in 2025–2026

China Merchants Energy Shipping (CMES), the world’s biggest VLCC owner with 61 vessels, expects today’s booming crude-tanker market to strengthen further next year and potentially remain strong through 2028. CMES says rates are being driven by a shortage of sanctions-compliant tonnage, strong long-haul crude flows, and robust global oil demand, with modern scrubber-fitted VLCCs earning about $129,200/day, up 37% over the past month. The owner predicts the 2026 VLCC rate midpoint will exceed 2025 levels, and although 2027 is less certain, it does not foresee a decline as long-haul voyages continue to grow. Supply growth remains heavily constrained: Chinese yards are sold out to 2028, only about 50 VLCCs can be delivered per year, and more than 300 VLCCs will reach 20 years of age by 2029, exiting mainstream trade. CMES also notes strong fixture activity in December and rising time-charter interest, but many owners prefer to stay in the spot market due to expectations of continued high earnings.

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