Multiple Supply Shocks Keep Crude Oil Markets in a Delicate Balance Despite Weekly Price Stagnation

Wednesday’s close brought modest moves across energy futures, with February WTI crude oil dipping just 0.05% to finish essentially flat, while February RBOB gasoline edged up 0.23%. Yet beneath this surface calm lies a complex tapestry of bullish factors that have consistently supported crude oil prices throughout the week—a story worth understanding given the structural shifts reshaping global energy markets.

Geopolitical Tensions Creating Supply Uncertainty

The primary driver of crude oil support stems from escalating supply disruptions tied to Venezuela and the Ukraine-Russia conflict. President Trump’s recent directive mandating a comprehensive blockade of sanctioned oil tankers bound for Venezuela has tightened the screws on an already struggling nation’s export capabilities. US Coast Guard interception of the Centuries tanker, coupled with active pursuit of the Bella tanker headed toward Venezuelan waters, underscores Washington’s commitment to enforcing these restrictions.

Meanwhile, Ukraine has emerged as an unexpected but significant factor in global oil market dynamics. Last Friday’s drone attack on a Russian shadow tanker in the Mediterranean marked an escalation in Ukraine’s campaign against Russia’s energy infrastructure. Over the past 90 days, Ukrainian strikes have damaged at least 28 Russian refineries, directly constraining Moscow’s crude refining and export capacity. The Baltic Sea has become particularly hazardous, with Ukrainian forces striking six Russian tankers since late November, while simultaneous US and EU sanctions on Russian petroleum assets have further compressed Russia’s ability to place barrels in international markets.

Production Discipline Meets Market Realities

OPEC+ announced on November 30 its intention to maintain a pause on production increases through Q1 2026, a decision rooted in acknowledged market rebalancing. Though the cartel authorized a 137,000 barrel-per-day increase for December, the broader strategy reflects recognition that a global oil surplus is materializing. The International Energy Agency projected a record 4.0 million bpd surplus for 2026, prompting OPEC+ to recalibrate its approach.

The group still faces restoration challenges, having cut 2.2 million bpd in early 2024 but retaining 1.2 million bpd yet to bring back online. OPEC’s November crude production slipped 10,000 bpd to 29.09 million bpd, reflecting these broader coordination efforts.

US Production Resilience Amid Rig Uncertainty

American crude oil output demonstrates surprising resilience despite contracting exploration activity. The most recent EIA estimate pins 2025 US production at 13.59 million bpd—upward revised from the previous 13.53 million bpd forecast. Week-ending December 12 production measured 13.843 million bpd, approaching but still shy of the 13.862 million bpd record logged in early November.

However, the active US oil rig count tells a different story. After hitting a 4.25-year low of 406 rigs in late December, the count recovered marginally to 409 rigs this week. This represents a dramatic compression from the 627 rig peak achieved in December 2022—a 35% decline illustrating the sector’s structural adjustment over 2.5 years.

Inventory Dynamics Signal Market Tightness

Recent EIA inventory reports reveal important underlying market conditions. As of mid-December, US crude oil inventories sat 4.0% below their five-year seasonal average, while gasoline stocks were only marginally above (down 0.4%) and distillate inventories lagged significantly (down 5.7%). These subseason readings hint at underlying market tightness despite the theoretical surplus conditions OPEC+ anticipates, potentially providing additional price support for crude oil and its petroleum products.

Understanding Crude Oil’s Structural Foundation

For those curious about how crude oil is actually produced—whether through traditional onshore extraction, deepwater drilling, or unconventional methods—understanding production dynamics proves essential to grasping current market support. The interplay between geopolitical supply constraints, disciplined cartel production, resilient American output, and lean inventory levels creates a floor beneath crude oil valuations, even as headline price movements appear subdued.

The market’s current equilibrium reflects this balance: supply worries from Ukraine and Venezuela offset surplus expectations from OPEC+ restraint and US production strength, keeping crude oil trading in a holding pattern while remaining supported by structural supply concerns.