Key Points
- Oil prices fell as concerns about too much supply overshadowed war-related risks.
- Russia is successfully selling its oil to key buyers like India, weakening the impact of sanctions.
- Major producers, including the U.S. and Brazil, are contributing to a global oil glut.
- Weak global demand for fuel is failing to keep up with the high rate of production.
Oil prices slipped on Monday, ending a three-day rally as worries about a global supply glut outweighed the latest geopolitical news. Traders are keeping a close watch on two key areas: India’s continued purchase of Russian oil and ongoing Ukrainian strikes against Russia’s energy infrastructure.
Despite the conflict, Russia is finding ways to keep its oil flowing. President Vladimir Putin recently promised India “uninterrupted shipments,” a significant development as U.S. negotiators arrive in the country for trade discussions. This suggests that a large volume of Russian crude is still reaching the global market, keeping a lid on prices.
At the same time, the market is monitoring the war itself, including a potential peace deal. U.S. President Donald Trump recently expressed his disappointment with Ukrainian President Volodymyr Zelenskiy’s response to a U.S. peace proposal.
But these tensions are bumping up against major concerns about a global oil glut. Major producers in OPEC+ and other nations—like the U.S., Brazil, and Guyana—are pumping out more oil than the world needs right now, as demand growth remains weak.
All eyes will be on upcoming monthly reports from the world’s top energy agencies this week for a clearer picture of the supply-demand balance.
One analyst from the Commonwealth Bank of Australia, Vivek Dhar, believes the oversupply problem will only get worse as Russia finds more ways to get around sanctions. He predicts this glut will eventually push Brent crude prices down toward $60 a barrel by 2026.
