Oil prices eased on Tuesday as concerns over global crude oversupply in 2026 outweighed geopolitical worries about Russian oil shipments under sanctions amid ongoing Ukraine peace talks. Market participants are navigating a delicate balance between supply expectations and potential demand growth influenced by upcoming U.S. monetary policy.

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Oil Price Movements

• Brent crude futures fell 33 cents, or 0.5%, to $63.04 per barrel as of 0730 GMT
• West Texas Intermediate (WTI) declined 28 cents, or 0.5%, to $58.56 per barrel

Both benchmarks had gained 1.3% on Monday as skepticism grew over a potential Russia-Ukraine peace deal, which would limit the unrestricted flow of Russian crude currently under Western sanctions.

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Supply Outlook for 2026

Despite concerns over restricted Russian exports, analysts warn that global crude supply is expected to outpace demand growth next year, putting downward pressure on prices.

• Priyanka Sachdeva, senior market analyst at Phillip Nova, noted:
  “In the short-term, the key risk is oversupply, and current price levels seem vulnerable.”

New sanctions targeting Russian oil majors Rosneft and Lukoil, along with restrictions on selling oil products refined from Russian crude to Europe, have led some Indian refiners, including private company Reliance, to scale back purchases. Russia is increasingly looking to divert exports to China, with Deputy Prime Minister Alexander Novak confirming discussions on expanding trade between Moscow and Beijing.

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Analyst Forecasts

Deutsche Bank projects a crude oil surplus of at least 2 million barrels per day in 2026, with no clear path back to deficits even by 2027. Analysts emphasize that the market is likely to remain bearish next year, despite short-term support from geopolitical tensions.

• Analyst Michael Hsueh said:
  “The path forward into 2026 remains a bearish one.”

A potential peace deal between Russia and Ukraine could lift sanctions, unleashing previously restricted Russian crude and temporarily boosting oil prices.

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Demand Outlook and U.S. Interest Rates

Oil markets are also influenced by expectations of a U.S. Federal Reserve rate cut at its December 9–10 policy meeting. Lower interest rates could stimulate economic growth, increasing fuel demand and providing some support to oil prices.

• Sachdeva commented:
  “The oil market is in a tug-of-war between a caution-driven supply overhang and demand hopes predicated on easier monetary policy.”

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Conclusion

Oil prices remain under pressure as oversupply concerns for 2026 clash with geopolitical tensions and the potential for increased demand from easing monetary policy. Investors are closely watching Ukraine-Russia negotiations, global production trends, and upcoming Federal Reserve decisions, making the oil market highly sensitive to both political and economic developments.