Oil Tumbles on Peace Deal Optimism, But Supply Risks Linger

Crude hit 5-week lows Tuesday as markets priced in a potential end to the Russia-Ukraine war—ABC News reported Ukraine accepted revised peace terms. WTI January fell 1.51% to close negative, with gasoline dropping 1.29%.

The real story: Russia’s refined product exports collapsed to 1.7M bpd (3-year low), after Ukraine’s relentless refinery campaign knocked out 13-20% of Russia’s refining capacity. But here’s the catch—global oil markets just flipped from deficit to surplus. OPEC now sees a 500K bpd surplus in Q3 (vs. -400K bpd expected last month), and the IEA forecasts a record 4.0M bpd surplus in 2026.

Weaker US data didn’t help either: retail sales missed, consumer confidence hit 7-month lows, private payrolls slipped. Meanwhile, crude stored on tankers hit a 2.25-year high at 114.31M barrels—classic sign of oversupply.

The wild card? Geopolitical risks around Venezuela and potential US military action could flip sentiment fast. For now, though, peace hopes > supply concerns.