Morning Highlights: Geopolitical Risks Offset Supply Glut Concerns

Tuesday, December 2, 2025

Oil traded slightly lower in early U.S. hours as markets balanced renewed geopolitical risk—drone strikes on Russian energy sites and escalating U.S.–Venezuela tensions—against ongoing worries of a structurally oversupplied 2026. Monday’s gains faded, but the tone remained steadier than last week as traders reassessed infrastructure damage, diplomacy updates, and shifting Russian supply flows.

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Market Snapshot (06:20 EST):

• Brent (Feb): $62.99 (-$0.18)

• WTI (Jan): $59.19 (-$0.13)

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Geopolitical Risk Premium Rebuilds

• Continued Ukrainian drone strikes on Russian energy assets—including the Nov. 29 hit on CPC’s Black Sea terminal—have restored some risk premium after steep losses earlier in November.

• Russian-flagged vessels also targeted in recent days, adding to shipping-route uncertainty.

• CPC resumed shipments from one mooring, but reliability concerns persist.

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U.S.–Venezuela Tensions Ratchet Higher

• President Trump’s declaration that Venezuelan airspace should be considered “closed” has kept traders on alert, raising questions about potential disruptions to a major global producer.

• The comment remains unexplained, leaving markets to handicap whether it signals a diplomatic maneuver or something more escalatory.

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Diplomacy: U.S.–Russia–Ukraine Talks Resume

• Trump’s envoy Steve Witkoff and Jared Kushner meet President Putin today for further discussions on the conflict’s endgame.

• Kremlin confirms additional meetings between Witkoff and Russian presidential envoy Kirill Dmitriev.

• Despite ongoing strikes, slow progress in talks keeps both upside and downside price scenarios alive.

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Russia–India Energy Trade Shifts

• Kremlin says India’s sharp reduction in Russian crude imports—set to hit a three-year low this month—will be temporary as Moscow works to boost future flows.

• India remains Russia’s largest oil buyer, making this shift geopolitically and commercially meaningful.

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Corporate Moves: Exxon Eyes Lukoil’s Iraq Assets

• Exxon has approached Iraq’s oil ministry to express interest in Lukoil’s 75% operating stake in the West Qurna 2 megafield (≈470 kbpd, ~9% of Iraqi output).

• Lukoil seeks to divest global assets under new U.S. sanctions; Treasury has allowed discussions through Dec. 13, pending deal-specific approvals.

• Acquisition would significantly expand Exxon’s re-entry into Iraq following its earlier West Qurna 1 exit and October MoU on Majnoon field development.

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Geopolitical risks—Russia’s infrastructure vulnerability, U.S.–Venezuela friction, shifting diplomacy—continue to counterbalance the broader bearish narrative of a looming 2026 supply glut. While prices remain soft, the geopolitical floor has become more durable over the past 72 hours, keeping crude in a narrow but tense range.