Geopolitical Storm Clouds Gather Over Oil Markets as January Kicks Off with a Bang! The start of 2026 has been anything but calm for the global oil market, with rising tensions around Iran and Venezuela throwing a spotlight on potential disruptions to their oil exports. This uncertainty sent Brent crude oil prices on a bit of a rollercoaster, initially surging by $6 per barrel to about $66 per barrel in the early weeks of the month, before settling back down to around $64 per barrel as of this report.
But here's where it gets controversial... While many might focus on the immediate price swings, the underlying story is about how these geopolitical events interact with already strained export capacities.
Both Iran and Venezuela were already grappling with export challenges. Iranian oil loadings saw a significant drop of 350,000 barrels per day (kb/d) in November and December, falling from a recent peak in October to 1.6 million barrels per day (mb/d). This led to a noticeable buildup of oil volumes waiting at sea. Similarly, Venezuelan crude exports experienced a sharp decline, plummeting from 880 kb/d in December to approximately 300 kb/d in early January. This slump was largely attributed to US sanctions impacting oil tankers navigating to and from the country.
And this is the part most people miss... While attention is drawn to the sanctioned nations, other major players are seeing different trends. In stark contrast, Russia's domestic refinery operations and its export volumes experienced a remarkable rebound in December. Crude output climbed by a substantial 550 kb/d month-on-month, reaching a 33-month high, even as the country continued to face attacks on its energy infrastructure. However, a widening discount for Russian crude oil and refined products did put a damper on their monthly export revenues, which were estimated at around $11 billion – roughly half of what they were before the invasion. Adding to the complexity, drone attacks targeting vessels and export facilities in the Black Sea and Caspian Sea further constrained supplies and exports from Kazakhstan.
While it's still too early to fully grasp the long-term impact of these latest geopolitical developments on oil markets, the current situation offers some breathing room. Bloated market balances are providing a degree of comfort to participants, helping to keep prices from skyrocketing.
Indeed, benchmark crude oil prices are currently sitting $16 per barrel lower than they were a year ago. This is a clear reflection of the significant global supply surplus that has accumulated over the past 12 months, a trend that aligns with our earlier forecasts. Observed global oil stocks have seen a substantial increase, rising by 470 million barrels (mb) in 2025, averaging an increase of 1.3 mb/d per day. This surge is evident in the growing volume of oil stored on ships (oil on water), increased crude oil inventories in China, and a rise in US gas liquids inventories. In November alone, global oil stocks jumped by an impressive 75 mb, or 2.5 mb/d, with more and more oil moving into onshore storage. Preliminary data suggests this trend continued into December, with notable builds in China following the issuance of new import quotas. This growth in storage has, in turn, offset steep declines in crude oil inventories observed in several Middle Eastern producer countries towards the end of the year.
The current global surplus is largely supported by robust growth in oil supply since the beginning of 2025. Interestingly, non-OPEC+ producers have been responsible for nearly 60% of the total 3 mb/d increase in supply. Within OPEC+, Saudi Arabia has taken the lead in boosting supply after production cuts were eased. Meanwhile, the Americas quintet – comprising the United States, Canada, Brazil, Guyana, and Argentina – has been the primary driver of increases from the non-OPEC+ group.
Here's a thought-provoking question for you: If these trends continue and OPEC+ maintains its current production policy, with US shale activity remaining strong, could global oil supplies potentially increase by another 2.5 mb/d in 2026? This, combined with the substantial surplus already in storage and at sea, would create a market buffer far exceeding demand, which is currently forecast to grow by 930 kb/d in 2026.
What are your thoughts on this outlook? Do you believe the market is adequately prepared for such a surplus, or are there hidden risks we should be considering? Let us know in the comments below!
