Oil futures settled slightly lower on Wednesday in choppy pre-holiday trading, as markets balanced signs of resilience in the U.S. economy against mounting concerns over supply disruptions from Venezuela and Russia, capping what is shaping up to be the commodity’s worst year since the pandemic-stricken depths of 2020.
Brent crude, the international benchmark, slipped 14 cents to close at $62.24 per barrel, a decline of 0.2%, while West Texas Intermediate, the U.S. marker, eased just 3 cents to settle at $58.29, barely down 0.05%. Despite Wednesday’s modest retreat, both contracts have clawed back approximately 6% since plummeting to near five-year lows on December 16, underscoring the market’s recent volatility.
However, the broader picture remains decidedly bearish. Brent is tracking toward a 16% annual decline, while WTI faces an even steeper 18% drop for the year—the sharpest yearly losses for both benchmarks since 2020, when the COVID-19 pandemic decimated global energy demand and briefly sent U.S. crude prices into negative territory.
The recent price recovery, modest though it may be, reflects a complex interplay of factors that have injected uncertainty into year-end trading. Chief among them: aggressive U.S. enforcement actions targeting Venezuelan oil exports and ongoing attacks on energy infrastructure in the Russia-Ukraine conflict.
“What we’ve seen over the past week is a combination of position-squaring in thin markets after last week’s breakdown failed to gain traction, coupled with heightened geopolitical tensions, including the U.S. blockade on Venezuela, and supported by last night’s robust GDP data,” explained Tony Sycamore, an analyst at IG.
The Venezuelan situation has emerged as the most immediate supply concern. More than a dozen loaded tankers are currently idling in Venezuelan waters, awaiting new instructions from their owners following Washington’s seizure of the supertanker Skipper earlier this month. Over the weekend, U.S. authorities targeted two additional vessels, effectively tightening the noose on the OPEC member’s crude exports.
“A choppy holiday trade looks to be the norm here, with the Venezuela blockade being the focal point into the holiday weekend,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Adding to supply worries, oil shipments from Kazakhstan via the critical Caspian Pipeline Consortium are set to plunge by a third in December—the lowest level since October 2024—after a Ukrainian drone strike damaged facilities at the main export terminal, according to two market sources who spoke on condition of anonymity.
Meanwhile, continued Russian and Ukrainian strikes on each other’s energy infrastructure have provided additional support to prices, according to analysts at Haitong Futures, though the impact has been limited by broader market fundamentals.
Offsetting some of the geopolitical anxiety, fresh U.S. economic data released Tuesday night showed the world’s largest economy expanded at its fastest pace in two years during the third quarter. Robust consumer spending and a sharp rebound in exports fueled the growth, offering some reassurance about future oil demand from America’s vast transportation and industrial sectors.
Yet even this positive economic signal has done little to alter the fundamental calculus weighing on crude markets: supply is projected to outpace demand in the coming year, keeping a ceiling on any sustained price rally.
On the supply front, U.S. crude inventories rose by 2.39 million barrels last week, according to figures from the American Petroleum Institute cited by market sources on Tuesday. Gasoline stocks climbed by 1.09 million barrels, while distillate inventories—which include diesel and heating oil—increased by 685,000 barrels.
The official government inventory data from the U.S. Energy Information Administration, typically released on Wednesdays, has been postponed until Monday due to the Christmas holiday, leaving traders to parse the API’s preliminary figures for direction.
The anticipated double-digit percentage losses for 2024 mark a stark reversal from the elevated prices that characterized much of the post-pandemic recovery period. While crude briefly touched five-year lows just over a week ago, the inability to sustain any meaningful rally reflects persistent concerns about weakening global demand—particularly from China, the world’s largest crude importer—and rising production from non-OPEC sources.
The thin trading volumes typical of the holiday period have amplified price swings in recent sessions, with position adjustments by traders ahead of year-end contributing to the volatility. As markets prepare to close for the Christmas holiday, the focus remains squarely on how geopolitical disruptions will play against the backdrop of ample supply heading into 2025.
For now, oil remains trapped in a tug-of-war between short-term supply jitters and longer-term oversupply fears—a dynamic that looks set to define trading well into the new year.
WHAT YOU SHOULD KNOW
Oil prices are headed for their worst annual performance since the COVID-19 pandemic, with Brent and WTI crude set to decline 16-18% in 2024. Despite recent modest gains driven by U.S. sanctions on Venezuelan oil exports and infrastructure attacks in the Russia-Ukraine conflict, the fundamental problem remains unchanged: global supply is expected to significantly outpace demand next year.
While geopolitical disruptions provide temporary price support, the market’s broader trajectory points to continued oversupply—meaning lower oil prices are likely to persist into 2025 regardless of short-term political tensions.
Excess supply, not geopolitics, is the dominant force shaping oil’s bearish outlook.
