Oil Rises as Venezuelan Supply Disruptions Outweigh Surplus Concerns

TOKYO/SINGAPORE: Oil prices climbed on Monday as supply disruptions linked to escalating U.S.-Venezuela tensions outweighed oversupply worries and the impact of a potential Russia-Ukraine peace deal.

Brent crude futures were up 30 cents, or 0.49%, at $61.42 a barrel, as of 0725 GMT, and U.S. West Texas Intermediate crude was at $57.72 a barrel, up 28 cents, or 0.49%.

Both contracts slid more than 4% in the prior week, weighed down by expectations of a surplus in 2026.

"Peace talks between Russia and Ukraine have swung between optimism and caution, while tensions between Venezuela and the U.S. are escalating, raising concerns about potential supply disruptions," said Tsuyoshi Ueno, a senior economist at NLI Research Institute.

"Still, with markets lacking clear direction, oversupply concerns remain strong and unless geopolitical risks escalate sharply, WTI could fall below $55 early next year."

Venezuela's oil exports have fallen sharply since the United States seized a tanker earlier last week and imposed fresh sanctions on shipping companies and vessels doing business with the Latin American oil producer, according to shipping data, documents and maritime sources.

The market is closely monitoring developments and their impact on oil supply, with Reuters reporting that the U.S. plans to intercept more ships carrying Venezuelan oil following this week's tanker seizure, intensifying pressure on President Nicolas Maduro.

Rising expectations of a surplus, however, continued to weigh on prices.

JPMorgan Commodities Research said in a note on Saturday that oil surpluses in 2025 are expected to widen further into 2026 and 2027, as global oil supply is projected to outpace demand, expanding at three times the rate of demand growth through 2026.

Ukrainian President Volodymyr Zelenskiy offered to drop his country's aspiration to join the NATO military alliance as he held five hours of talks with U.S. envoys in Berlin on Sunday. Negotiations are set to continue on Monday.

U.S. envoy Steve Witkoff said "a lot of progress was made," though additional details were not divulged.

Ukraine's military said on Friday that it attacked a major Russian oil refinery in Yaroslavl, northeast of Moscow; industry sources said the facility had suspended output.

Russian state oil and gas revenue in December is likely to fall by nearly half from a year earlier to 410 billion roubles ($5.12 billion) due to lower crude prices and a stronger rouble, Reuters calculations showed on Friday.

A possible peace deal could eventually increase Russian oil supply, which is currently sanctioned by Western countries.

On the supply side, U.S. energy firms last week cut the number of oil and natural gas rigs operating for a second time in three weeks, energy services firm Baker Hughes said on Friday.