Is the oil market's wild ride finally cooling off, or are we just scratching the surface of a bigger storm?
Imagine oil prices tumbling below $60 a barrel, sending shivers through investors as they grapple with U.S. President Donald Trump's bold moves to broker peace in the Ukraine conflict and intensify pressure on Venezuela's leader, Nicolas Maduro. But here's where it gets controversial: While geopolitical fireworks grab the headlines, the true force shaping oil prices in the coming months might be something far more everyday—a massive buildup of crude supplies both onshore and afloat.
And this is the part most people miss: It's not just about what's happening on land.
In London, as of December 19, global Brent crude futures dipped nearly 3% on Tuesday, hitting levels not seen since early 2021. This plunge came amid hopeful whispers of a Ukraine ceasefire, nearly four years after Russia's full-scale invasion under President Vladimir Putin. Yet, prices bounced back about 2% the next day when Trump announced via Truth Social an order to blockade all sanctioned oil tankers entering or exiting Venezuela, as part of escalating U.S. efforts against Maduro.
Oil has long been a mirror reflecting international tensions, so these reactions aren't shocking. However, the actual effect of a Ukraine peace accord or a Venezuelan oil embargo on tangible supplies could be minimal.
Instead, the key factor might boil down to a striking statistic: 1.3 billion barrels of "oil on water"—crude lingering at sea, per data from Kpler. This marks the highest amount since April 2020, when the COVID-19 pandemic slashed consumption, and it's roughly 30% up from August. To put this in perspective, picture vast fleets of tankers slowly circling oceans, unable to offload their cargo quickly enough due to oversupply. For beginners trying to understand, think of it like a traffic jam in the world's oceans—too many ships carrying oil that buyers aren't rushing to purchase right away, leading to slower speeds and longer waits.
Adding to the picture, oil stored on tankers for 20 days or more has climbed to 51 million barrels, the peak since June 2023. The average pace of loaded crude tankers (not counting those in floating storage) dropped to 10 knots this December from 10.3 in November—the slowest rate in at least seven years, according to Kpler's senior crude analyst, Muyu Xu. This slowdown signals a market struggling to absorb the extra supply.
A big chunk of this surge stems from tightened sanctions on Russia. Seaborne Russian crude in transit reached about 155 million barrels this week, a 55% jump from January, as Asian purchasers, especially in China and India, hold back due to fresh U.S. penalties on giants like Rosneft and Lukoil. But history shows these constrained barrels don't vanish—they often get blended, relabeled, or swapped between ships, eventually finding markets at discounted rates. In fact, early indicators suggest Chinese and Indian refineries are stepping up buys, snapping up deals at bargain prices that could ease some pressure.
Yet, the buildup isn't limited to Russian oil. Excluding those barrels, seaborne volumes have still spiked due to increased production in the Americas—think the U.S.—and the Gulf region, where OPEC+ has eased some prior output reductions. This potential oversupply could drag on prices for a long time, unless something drastic shifts in the physical market.
But here's where it gets controversial: Are we overreacting to geopolitical drama while ignoring a supply glut that's staring us in the face?
What if a Ukraine truce or a full Venezuelan blockade did materialize? A ceasefire might hit the diesel market harder than crude itself. Russian diesel shipments have dropped 10% in 2025 to 779,000 barrels daily, about 10% of world trade, largely from Ukrainian drone raids on Russian refineries. This shortfall has boosted European diesel margins by 27% this year, even as crude prices fell 20%, based on LSEG data. Ending the war could let Russia fix its damaged refineries, resolve internal fuel woes, and ramp up diesel exports, thereby squeezing those margins.
For crude oil, though, the story differs. Russian exports have stayed steady at around 3.5 million barrels per day since 2022. Sanctions have aimed at cutting Moscow's profits rather than volumes, to avoid global market chaos. Plus, Russia's unofficial "shadow fleet" of hundreds of tankers, operating beyond Western finance systems, has kept crude flowing, mainly to China and India.
Venezuela presents a parallel but unique challenge. A U.S. naval blockade on sanctioned tankers might slash the country's output and exports by about 500,000 barrels daily, per Reuters estimates. That's a blow to Maduro's regime, but in a world consuming 100 million barrels a day, it's like a tiny dent—hardly enough to rock crude prices significantly.
The real threat looms larger: an expanding worldwide supply that's poised to overshadow these headlines.
The International Energy Agency predicts a 3.85 million barrels per day surplus in 2026, equating to roughly 4% of global demand. OPEC's analysts paint a rosier, more balanced picture for next year, but that hinges on a notable uptick in consumption. The oil price trajectory in 2026 will hinge on whether this emerging glut grows or fades. Geopolitical upheavals still matter, but they're fading from center stage.
Curious to dive deeper into energy insights? Sign up for my Power Up newsletter, delivered Mondays and Thursdays, packed with exclusive commentary, trending stories, and market links.
If you're enjoying this piece, explore Reuters Open Interest (ROI)—your go-to for sharp, data-backed global finance analysis. With markets evolving at lightning speed, ROI helps you stay ahead. Follow us on LinkedIn and X for more.
Ron Bousso
Editing by Marguerita Choy
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Ron is the Reuters Energy Columnist. He offers commentary on global energy markets and their intersection with geopolitics, the economy, and every day life. From oil and gas to solar and wind power, the world's growing demand for energy is shaping governments' efforts to expand their economies while the world also seeks to decarbonize. Prior to that, Ron was Oil and Gas Corporates Correspondent at Reuters since 2014, covering the world’s top oil and gas companies and their transition into low carbon energy. He has broken major stories on companies including Shell, BP, Chevron, and Exxon. He also looks at the physical oil markets with a focus on European refining.
What do you think? Is geopolitics still the puppet master pulling oil's strings, or has supply finally taken the reins? Do you agree that a Venezuela blockade is more bark than bite? Share your takes in the comments—we'd love to hear differing views!
