Geopolitical Tensions and Supply Constraints Prop Up Oil Markets Despite Flat Wednesday Close

Market Movement and Key Drivers

WTI crude oil for February delivery finished virtually flat on Wednesday, declining just 0.03 points (0.05%), while RBOB gasoline edged higher by 0.0040 points (0.23%). Despite the subdued closing, the energy complex drew meaningful support throughout the trading week from escalating geopolitical tensions and tightening supply dynamics that continue to underpin prices.

Crude oil—a naturally occurring petroleum liquid used extensively for energy and industrial production—remained buoyed by multiple bullish catalysts. The most significant support came from Venezuelan-related shipping disruptions and Ukraine’s intensified attacks on Russian energy infrastructure, creating a backdrop of supply uncertainty that traders closely monitored.

Venezuela Oil Embargo Pressures Global Supply

The Trump administration’s aggressive stance on Venezuelan oil shipments has become a primary price support. Last week’s directive mandated a comprehensive blockade affecting all sanctioned petroleum tankers entering or departing Venezuelan waters. This policy tightened further when the US Coast Guard intercepted the non-sanctioned Centuries tanker in Caribbean waters over the weekend. Concurrently, US military assets pursued the Bella 1 tanker heading toward Venezuela, signaling intensified enforcement of sanctions regimes.

These disruptions have tangible market impact. Vortexa data released Monday revealed that stored crude aboard stationary tankers (idle for seven days or longer) contracted 7% week-over-week to 107.15 million barrels during the week ending December 19, reflecting both supply constraints and shifting global trade patterns.

Ukraine-Russia Energy Conflict Tightens Supply

Ukrainian forces have significantly expanded their campaign against Russian oil infrastructure, unleashing drone and missile strikes against approximately 28 Russian refineries over the past quarter. These attacks directly impair Russia’s export capabilities and reduce available global crude supplies.

The naval dimension has intensified as well. Since late November, Ukrainian forces have escalated attacks on Russian tankers navigating the Baltic Sea, successfully targeting at least six vessels with unmanned systems. Combined with newly implemented US and EU sanctions targeting Russian petroleum companies, infrastructure, and shipping assets, Moscow’s export volumes face considerable headwinds.

Production Metrics and Rig Activity

Despite price support, US drilling activity remains historically depressed. Baker Hughes’ latest report indicated that active US oil rigs rose modestly by three units to 409 in the week ending December 26, following a multi-year low of 406 rigs the previous week. This recovery, while modest, trails far behind the 5.5-year peak of 627 rigs recorded in December 2022—illustrating the sustained weakness in domestic exploration and production investments.

US crude oil output in the week ending December 12 slipped 0.1% week-over-week to 13.843 million barrels per day, marginally below November’s record of 13.862 million bpd. The EIA recently elevated its 2025 US crude output forecast to 13.59 million bpd from the previous estimate of 13.53 million bpd.

Global Supply-Demand Rebalancing

OPEC+ reinforced its commitment on November 30 to maintain its December production increase of 137,000 bpd followed by a pause in output additions throughout Q1 2026. This cautious approach reflects concerns about emerging global oil surpluses. The International Energy Agency projected a record 4.0 million bpd surplus for 2026, prompting OPEC+ to recalibrate expansion timelines.

OPEC’s November output declined 10,000 bpd to 29.09 million bpd. The organization recently revised its Q3 2025 market assessment, shifting from an anticipated deficit to a surplus of 500,000 bpd—a notable reversal driven by robust US production and increased OPEC member output that exceeded previous forecasts.

Inventory Positioning

Recent EIA data (December 12) painted a mixed inventory picture: US crude stockpiles rested 4.0% below the five-year seasonal average, gasoline inventories tracked 0.4% below the comparable benchmark, while distillate fuel reserves sat 5.7% beneath historical norms. This inventory positioning continues supporting crude valuations despite broader supply concerns.

The convergence of sanctions-driven supply disruptions, sustained geopolitical risks, and disciplined OPEC+ production management has maintained a structural price floor, enabling the crude market to absorb near-term volatility while crude remains supported by fundamental supply constraints.