Oil prices fell on the first trading day of 2026 as expectations of a growing supply surplus offset geopolitical risks to production in some OPEC+ countries.

Brent crude traded near $60 per barrel on a relatively thin trading day, while West Texas Intermediate neared $57. Middle East markets, including derivatives such as the regional benchmark Dubai, weakened amid heavy selling pressure during the key Asian trading window, traders familiar with the matter said.

Faced with a seasonal decline in consumption, the Organization of the Petroleum Exporting Countries (OPEC) is likely to remain cautious. Key OPEC+ members, led by Saudi Arabia, will hold an online meeting on January 4, where they are expected to reaffirm their decision to halt supply increases during the first quarter.

Oil prices are expected to plummet in 2025 as OPEC+ and its competitors, from the US to Guyana, increase production while demand growth slows. The International Energy Agency (IEA) forecasts a surplus of around 3.8 million barrels per day for this year.

Amid these expectations, advisers moved to a 91% short position on Brent on Friday, up from 82%, according to data from Bridgeton Research Group, which Kpler acquired in December. Those advisers previously held a 73% short position on WTI.

This surplus forecast acts as a shock absorber against potential production disruptions. One such scenario could arise in Iran, where US President Donald Trump has signaled that the US is ready to assist protesters if authorities crack down on the unrest, prompting a top Iranian official to threaten retaliation against US forces in the region.

Tehran and other cities have witnessed a wave of demonstrations after the local currency plunged to an all-time low. According to the IEA, Iran will be the world's ninth-largest crude oil producer in 2023.

Another risk lies in Venezuela, where the Trump administration has stepped up its campaign against the country's oil exports through a maritime blockade and by imposing sanctions on companies in Hong Kong and mainland China, along with vessels accused of evading restrictions. These measures are part of an effort to increase pressure on the Nicolas Maduro regime.

Meanwhile, Russia's war against Ukraine continues despite peace efforts by Europe and the US. Moscow and Kyiv attacked each other's Black Sea ports over the New Year period, damaging oil infrastructure, including refineries. The conflict has impacted energy flows from Kazakhstan, another member of the OPEC+ alliance.

WTI for February delivery fell 1.3% to $56.73 a barrel at 11:33 a.m. in New York. Brent for March settlement fell 1.3% to $60.12 a barrel. (alg)

Source: Bloomberg