Geopolitics drive short-term volatility but global supply keeps the market heavy
Oil markets spent the week dominated by geopolitics as Ukraine peace talks stalled and US–Venezuela tensions escalated. While these headlines injected risk into the front of the curve, the underlying physical market still appears heavy as global supply growth continues to outpace demand.
Ukraine set a record pace of strikes on Russian energy infrastructure in November. An attack on the Kazakh Caspian Pipeline Consortium terminal caused significant damage and temporarily halted loading on one of its 800 MBbl/d moorings. Despite US pressure for a negotiated settlement, Moscow rejected key elements of the peace framework, and Ukrainian attacks have continued alongside intensified diplomatic activity.
Russian exports also faced growing logistical friction as US sanctions pushed more barrels into shadow-fleet channels. Strikes on refineries and export facilities have slowed transit and increased reliance on intermediaries, lifting Russian oil-on-water above 180 MMBbl.
At the same time, US–Venezuela tensions rose after President Trump warned that Venezuelan airspace should be considered closed and signaled that military action against cartel targets could occur soon. Venezuelan floating storage reached a three-year high, driven mostly by softer Chinese demand rather than meaningful disruptions to flows.
As barrels at sea accumulate, the market has added a modest geopolitical premium to the front of the curve. Even so, the broader takeaway remains unchanged. Physical balances remain loose, global supply continues to exceed demand, and long-dated prices show limited response despite persistent geopolitical noise.
OPEC reinforced this narrative by maintaining its plan to pause output increases in the first quarter. The group highlighted seasonal softness at a time when global supply growth remains steady, underscoring its cautious posture and the market’s underlying looseness.
The WTI CMA curve reflects these fundamentals. Bal 2025 holds a slight backwardation to 2026 and 2027 before gradually rising, signaling that traders view the geopolitical disruptions as near-term developments that do not materially alter the longer-term supply and demand outlook.
Geopolitics added brief volatility this week, but the market remains well supplied. Ukraine’s attacks, slower Russian exports, and US–Venezuela tensions created modest risk premiums, yet the forward curve still signals a loose balance into 2026. AEGIS maintains a bearish view with limited upside risk.