By Giulia Petroni
Here's a look at what happened in oil markets in the week of Dec. 1-5 and what the focus will be in the days to come.
OVERVIEW: Oil prices are on track for weekly gains, buoyed by stalled Ukraine peace talks and expectations that the Federal Reserve will lower interest rates further next week. However, gains are capped by concerns over excess supply and signs of softer demand. Brent crude trades just above $63 a barrel, while West Texas Intermediate is at $59 a barrel.
MACRO: Investors are almost unanimously pricing in a 25-basis-point interest rate cut by the U.S. central bank next week--a scenario that typically supports economic activity and boosts demand for commodities. However, some market watchers also say they expect Fed Chair Jerome Powell to signal a cautious meeting-by-meeting approach to future rate cuts in order to balance concerns about labor market weakness and elevated inflation.
GEOPOLITICAL RISKS: Negotiations to end the war in Ukraine have been in the spotlight this week, though high-level talks between the U.S. and Russia failed to yield any significant progress.
A peace agreement could lead to the removal of U.S. sanctions on Russian oil, freeing up more barrels into the market at a time when concerns over a potential surplus are growing. However, markets aren't pricing in a large probability of a peace agreement in the near term, with persistent attacks on Russia energy infrastructure continuing to threaten supply.
Meanwhile, tensions between the U.S. and Venezuela are growing, keeping the geopolitical risk premium high. Earlier this week, the U.S. Treasury Department imposed sanctions on key affiliates of the Venezuelan gang known as the Tren de Aragua, saying the network's narcotrafficking and human smuggling operations are a grave threat.
SUPPLY AND DEMAND: Investors continue to anticipate a heavily oversupplied oil market in the remainder of this year and most of 2026 amid large builds of oil on water--either stored on tankers or in transit--since the end of August.
Saudi Arabia has further reduced its official selling prices for oil deliveries in January, a move seen as a sign of caution and an effort to gain market share. Customers in Asia now only need to pay a premium of $0.60 a barrel on top of the Oman/Dubai benchmark for Arab Light. "In December, the premium was $1, and in November it was more than $2," Commerzbank analysts said. "The last time the price premium was lower than next month was five years ago, during the coronavirus pandemic."
The latest weekly inventory data from the Energy Information Administration showed crude oil stocks rose by 600,000 barrels against expectations of a 1.7- million-barrels fall.
WHAT'S AHEAD: All attention now turns to next week's FOMC meeting. ING analysts note that policymakers appear split on whether inflation or the labor market poses the greater concern, raising the likelihood of a divided vote. This could also signal a slower path for rate cuts in 2026.
On the energy front, both OPEC and the IEA will publish their monthly oil reports next week. "The new forecasts from the energy agencies out during the coming week are likely to weigh on prices," analysts at Commerzbank said. "Although no major corrections are expected, they would continue to point to an oversupply on the oil market in the coming year."
Write to Giulia Petroni at giulia.petroni@wsj.com
(END) Dow Jones Newswires
December 05, 2025 10:33 ET (15:33 GMT)
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