Can Oil Prices Hold This Rebound After Last Weeks Sharp Slide?

Source: Kapitales Research

Highlights:

• Oil prices edged higher in early Asian trade, with Brent at US$61.44 a barrel and WTI at US$57.76 at the time of writing, after both benchmarks fell more than 4% last week.
• Ongoing fears of a global supply glut and weak demand from China and Europe continue to weigh on market sentiment and limit upside.
• Geopolitical tensions involving Ukraine and Venezuela offered only limited support, as expectations of rising supply into 2026 remain dominant.

Early Asian Gains Follow Heavy Weekly Losses

Oil prices edged higher in early Asian trade, attempting a modest recovery after a bruising week for energy markets. At the time of writing, Brent oil futures for February delivery were up 0.5 per cent at US$61.44 a barrel, while West Texas Intermediate crude gained 0.6 per cent to US$57.76 a barrel. The bounce comes after both benchmarks dropped more than 4 per cent last week, highlighting the fragile mood gripping traders.

Supply Glut Fears Still Dominate

Despite the early uptick, concerns about oversupply and weak demand continue to cap upside momentum. Investors remain focused on rising output from major oil producers and stubbornly high global inventories. Analysts have warned that oil markets are heading into 2026 with a supply surplus, as additional barrels from OPEC+ and non-OPEC producers come online at a time when demand growth remains muted.

China and Europe have been key areas of concern. Slower industrial activity and cautious consumer spending have reduced expectations for strong fuel demand, leaving prices struggling to build sustained gains even after sharp sell-offs.

Geopolitical Risks Offer Limited Support

Geopolitical tensions have provided some short-term support, but not enough to shift the broader trend. Continued strikes on Russian energy infrastructure linked to the war in Ukraine have raised concerns about potential supply disruptions. Meanwhile, renewed tensions between the United States and Venezuela have also offered a brief lift, with fears that stricter enforcement measures could curb

Venezuelan crude exports. Venezuela holds some of the world’s largest oil reserves, meaning any disruption to its shipments could tighten supply at the margins. However, traders appear reluctant to price in prolonged disruptions.

Ukraine Talks and China Data in Focus

Oil prices have also been pressured by expectations that diplomatic efforts to end the war in Ukraine could eventually bring more Russian oil back to global markets. Recent discussions involving US and Russian officials have fuelled speculation that sanctions could ease over time, adding further supply.

Meanwhile, fresh data showed China’s industrial production and retail sales missed expectations in November. As the world’s largest crude importer continues to grapple with weak growth and a troubled property sector, demand concerns remain front and centre.

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