Oil fell as projected 2026 surplus outweighs Venezuela risk premium

Oil prices settled lower on Tuesday as traders looked past near-term geopolitical developments to focus on mounting concerns over a widening global supply surplus. Initial support from the US capture of Venezuelan leader Nicolas Maduro faded as fresh institutional data underscored a growing structural imbalance between rising output and subdued demand growth.

Brent crude fell $1.06, or 1.7%, to settle at $60.70 a barrel.

WTI declined $1.19, or 2%, to $57.13 a barrel.

The pullback reinforced an increasingly bearish market narrative, with participants shifting attention away from episodic geopolitical shocks toward a 2026 outlook characterised by ample supply. Some analysts estimate the surplus could reach as much as 3 million bpd in the first half of the year, weighing heavily on forward price expectations.

Analysts cautioned that it remains too early to fully assess the impact of Maduro’s capture on the global oil balance. However, the prevailing view is that overall supply will remain sufficient even if Venezuelan output dynamics change. Data released by Morgan Stanley on Tuesday showed global oil demand growth slowed to 900,000 bpd last year, well below the historical average of 1.2 million bpd, while combined OPEC and non-OPEC supply entered 2026 at multi-year highs.

Downside risks were further amplified by expectations of a post-embargo Venezuela. Following Maduro’s capture over the weekend, US President Donald Trump said American energy firms are ready to invest heavily in rebuilding the country’s oil sector. Reports that US oil company executives are scheduled to visit the White House on Thursday suggest a diplomatic framework may already be taking shape to support higher Venezuelan exports, which averaged 1.1 million bpd last year.

From a technical perspective, resistance levels held as traders awaited official inventory data. Preliminary API figures pointed to a 2.77 million barrel draw in US crude stocks, though the price impact was offset by increases in refined fuel inventories.

With the EIA’s official report due later today, market participants remain cautious. Many note that as the scale of the expected 2026 surplus becomes clearer, the market appears increasingly vulnerable to a sustained slide in benchmark prices toward the $55 range.

Written by: Aiman Haikal