Oil prices eased on Tuesday as concerns supply will exceed demand next year outweighed worries that Russian shipments will remain under sanctions as talks to end the Ukraine war remain inconclusive.
Brent futures fell 27 cents, or 0.4%, to $63.10 a barrel as of 0500 GMT. West Texas Intermediate (WTI) crude declined 23 cents, or 0.4%, to $58.61.
Both crude benchmarks gained 1.3% on Monday as rising doubts about a peace deal to end the Russia-Ukraine war reduced expectations for the unfettered flow of Russian crude and fuel supplies, which are under sanctions from Western nations.
Even as market participants worry about Russian shipments, the overall outlook for crude oil supply and demand balances in 2026 is looser amid numerous forecasts supply growth will exceed demand increases next year.
“In the short-term, the key risk is oversupply and current price levels seem vulnerable,” Priyanka Sachdeva, senior market analyst at Phillip Nova, said in a note on Tuesday.
Because of new sanctions on Russian oil majors Rosneft and Lukoil and rules against selling oil products refined from Russian crude to Europe, some Indian refiners have cut back their purchases of Russian oil, particularly private company Reliance.
With limited options for sales, Russia is looking to increase exports to China.
On Tuesday, Russian Deputy Prime Minister Alexander Novak told a China-Russia business forum in Beijing Moscow and Beijing have been discussing ways to expand Russian oil exports to China.
Overall though, market analysts remain focused on the potential for wider supply and demand imbalances.
Deutsche Bank sees a 2026 crude oil surplus of at least 2 million barrels per day and no clear path back to deficits even by 2027, the bank said in a note on Monday.
“The path forward into 2026 remains a bearish one,” analyst Michael Hsueh said.
The expectation for softer markets next year is outweighing the lack of a resolution on a Ukraine-Russia peace deal, which supported prices. A deal could lead to sanctions being lifted on Moscow, unleashing previously restricted oil supplies into the market.
Still, oil markets are finding some support from increasing expectations the U.S. will cut interest rates at its December 9 to 10 policy meeting, with Federal Reserve members indicating their support for a cut.
Lower interest rates could stimulate economic growth and strengthen oil demand.
“The oil market is in a tug-of-war between a caution-driven supply overhang and demand hopes predicated on easier monetary policy,” Sachdeva said.
(Reporting by Ashitha Shivaprasad in Bengaluru and Jeslyn Lerh in Singapore; Editing by Christian Schmollinger)