This week, we expect oil prices to remain pressured and inch down to between $63.00-65.00/bbl.
We focus on the following three drivers of price action this week:
- Russia/Ukraine
- Oversupply narrative
- Weakly negative momentum
President Trump’s meeting with Putin over the weekend caused little splash in the market, with a gap down of only -10c on Monday’s open, after which it has recovered to a daily gain at the time of writing. Trump hasn’t secured a Russia-Ukraine ceasefire, but he’s pushing for a peace deal, with European leaders and Ukraine heading to the States to negotiate today. The market was selling off ahead of the meeting, but the lukewarm reaction today, instead of any genuine bullish feeling, points to better risk to the downside. After the summit, Trump held off on imposing “secondary tariffs” on countries buying Russian oil, chiefly China and India. The tariffs had been floated as a way to pressure Moscow over its war in Ukraine, but Trump said the summit made progress and paused new measures, especially against Beijing. India has already been hit with steep duties, including a recent doubling to 50%, prompting New Delhi to call the sanctions “unfair” while defending its reliance on discounted Russian crude. A peace deal would open further downside as the market anticipates the return of Russian barrels, although the sanctions’ effective rerouting of flows may cushion the impact of this ‘return’.
Outside of geopolitics, there is renewed talk of oil oversupply next year; the IEA’s projection is around 4 mb/d. Although many expect an oversupply, this number is extremely high, and scepticism is evident, as if the market honestly expected such an imbalance, it would make sense for prices to have collapsed far more sharply. Although this figure may be perceived as too high, oversupply is expected. Global oil inventories have started to creep higher. The EIA projects global liquid fuel demand in 2H25 will rise 1.6 mb/d from 1H25, boosting inventory builds by nearly 0.5 mb/d. Stocks are building, seasonal demand softens at the turn of the year, and non-OPEC supply growth from the US, Brazil, and Guyana continues adding barrels. The Onyx implied stock build for 2H’2025 is 1.6mb/d and 1.5mb/d for 2026, although the build is significantly less in the second half of the year when compared to the first.
Market positioning reinforces this fragility. Speculators last Tuesday held the first-ever recorded net short position in WTI across CME and ICE combined, a sign of waning confidence in the near-term outlook. On the other hand, Brent has a higher net positioning from funds, ICE COT shows managed by money length at its lowest in 7 weeks, but remains positive at just under +200mb. This indicates that there is more selling that can come from funds. On our index, CTA positions for ICE Brent and NYMEX WTI are now approaching their long-term averages, which could provide some near-term respite to the downtrend.
Looking at technicals, MACD shows negative momentum, but it’s decreasing each day due to a lack of clear direction. In stochastics, the fast line crossed above the slow line while both are in oversold territory, suggesting a potential price rebound. However, the market is rangebound; there can be many crossovers without a real breakout, so it might be best to confirm with other indicators. The Ichimoku lagging line sits inside the cloud, which shows the market is stuck in a range with no clear direction, which is no news to anyone. But if it slips below the cloud, that’s a bearish warning – momentum is turning down and prices could be heading into a more profound decline. With the risk/reward skewed to the downside, there may be potential for a breakout in this direction.
