Global oil markets experienced a day of choppy trading, with prices ultimately ticking higher as traders balanced simmering geopolitical risks against mounting evidence of a supply surplus. The benchmark West Texas Intermediate (WTI) crude rose by as much as 1.6 per cent during the session on December 4, 2025.
Geopolitical Risks Provide Price Support
Several international flashpoints lent support to oil prices. The ongoing war in Ukraine remained a focal point, with Ukrainian negotiators preparing for a new round of talks in Florida. The diplomatic path appeared rocky, as Russian President Vladimir Putin stated that certain points in a U.S.-backed peace plan were unacceptable to Moscow. This political stalemate means that sanctions on Russian oil exports are likely to remain in place, restricting a significant portion of global supply.
Further bolstering the market, President Putin emphasized that Russia's energy cooperation with India "remains unaffected," noting smooth oil flows and the expanding operations of a Russian-linked refinery in the country. Meanwhile, comments from U.S. President Donald Trump added another layer of risk. He reiterated that the United States would soon begin striking alleged drug cartels on land in Venezuela, a move that analysts fear could disrupt the South American nation's already fragile oil production and exports.
The Growing Weight of Oversupply
Counteracting these geopolitical supports are powerful signals of a well-supplied market. The most concrete sign came from Saudi Arabia, the world's largest crude exporter. State producer Saudi Aramco announced it would reduce the official selling price of its flagship Arab Light crude grade for Asian customers in January. The cut brings the price to a 60-cent premium over the regional benchmark, marking the lowest level for this key grade since 2021.
This pricing move is widely interpreted as an attempt to maintain market share in the face of rising competition. It underscores a broader trend: crude prices have fallen approximately 17 per cent this year. The decline is driven by booming production from non-OPEC+ nations in the Americas, coupled with increased output from the OPEC+ alliance itself, which has collectively outpaced sluggish global demand growth.
Market Outlook and Consumer Impact
The supply glut is having a tangible impact across the oil complex. In Canada, domestic crude prices have weakened to their lowest point relative to the U.S. benchmark since March. Looking ahead, the International Energy Agency has predicted a record supply surplus could emerge in 2026, a view echoed by several Wall Street banks forecasting lower futures prices.
"No matter how much demand is going to come in, you just have a lot of supply," said Saad Rahim, Chief Economist at Trafigura Group, during the Financial Times Commodities Asia Summit in Singapore. "The path of least resistance for prices is likely down."
For consumers, however, the oversupply narrative translates into relief. In the United States, the national average price for gasoline recently fell below US$3 per gallon for the first time in four years. Diesel prices have also been on a steady downward trajectory in recent weeks, offering a boon to transportation and industrial sectors.
The oil market remains caught in a tug-of-war. While immediate geopolitical tensions from Eastern Europe to South America are preventing a steeper price collapse, the fundamental picture painted by producers from Riyadh to Texas suggests that the era of ample supply—and lower costs at the pump—may have more room to run.
