Price Performance Summary

In the first week, crude prices briefly rebounded on continued geopolitical risk after Ukraine attacked Russia’s Novorossiysk port. But with Washington accelerating peace push efforts and expectations for tighter sanctions fading—alongside a sharp build in U.S. refined-product inventories that signaled weaker demand—oil prices softened mid-week and ended roughly 3% lower.

At the start of the second week, hopes for a December Fed rate cut and lingering uncertainty around Russia-Ukraine tensions lifted crude further. Yet once positive signals from peace talks emerged, the market quickly pivoted toward expectations of supply improvement. A large crude-inventory build in the U.S. triggered a sharp selloff. Toward the week’s end, reports suggested OPEC+ would likely maintain existing production cuts, helping oil rebound from the lows and finish the week near flat.

Market Data Update

Crude and Product Inventories Improve, While Refinery Maintenance Temporarily Caps Output

Over the past two weeks, U.S. commercial crude inventories fell by more than 700,000 barrels in total—keeping the overall structure healthy—while the Strategic Petroleum Reserve continued modest replenishment of around 1 million barrels. Refined products, however, saw an unusual parallel increase: gasoline inventories rose by roughly 2.8 million barrels, and distillates gained 1.3 million barrels, signaling softer demand and putting pressure on prices.

On the supply side, refinery utilization climbed 2.9 percentage points to 92.3% as maintenance wrapped up and pre-winter stocking resumed. Yet the active rig count posted a rare double-digit weekly drop—down 12 rigs to a recent low—highlighting how weak prices are discouraging upstream investment, which could later slow crude-supply growth.

Key News Commentary

Progress Toward a Russia-Ukraine Peace Agreement

On November 25, Ukraine largely accepted the U.S.-backed peace framework. On November 30, senior U.S. and Ukrainian officials met in Florida, after which former President Trump stated that a peace agreement is “very likely.”

The potential impact on the oil market can be viewed through several lenses.

First, a ceasefire would halt Ukrainian strikes on Russian refineries, tankers, and port infrastructure—dramatically reducing supply-disruption risk for Russian crude.

Second, sanctions. Russia accounts for roughly 10% of global crude supply. Pre-sanctions, exports were mainly to Europe; post-sanctions, barrels shifted to China and India at steep discounts, compressing Russian upstream margins. If peace leads to partial sanctions relief, higher netbacks could incentivize Russian producers to ramp up investment—raising the risk of oversupply and medium-term price pressure.

Third, OPEC+ quotas. Although Russia is formally part of OPEC+ cuts, wartime disruptions often pushed its actual production below its nominal ceiling. A stable post-war recovery could lift output above quota levels, complicating OPEC+ policy coordination.

Overall, a Russia-Ukraine ceasefire is more likely to lower the medium-term price floor than to trigger a sudden repricing. Much of the war-related risk has already been absorbed over three years of conflict, and markets were mainly repricing the additional geopolitical premium imposed by the U.S. following Trump’s election, rather than the baseline war itself.

Uncertainty will also persist: ceasefires have collapsed multiple times, and geopolitical tension will not vanish overnight. Even with peace, Europe—due to energy-security concerns—is unlikely to revert to its pre-war heavy reliance on Russian crude. Infrastructure and policy have already shifted toward diversification. A more realistic scenario is partial, conditional easing of restrictions on certain refined products or pipeline flows, rather than a full normalization.

Fundamental View

Fundamentals added fresh downward pressure this week. Both U.S. crude and refined products posted larger-than-expected inventory builds. Although absolute inventory levels remain relatively low, the builds are unusual for this stage of the season. December demand is typically supported by the heating season, and many regions have already experienced early-season cold snaps that should have boosted product drawdowns. Instead, inventories rose, and—combined with softer U.S. consumption data—this may indicate weaker-than-expected end-demand. Further confirmation is needed to determine whether this trend will persist.

Conclusion

In the near term, crude is likely to remain skewed to the downside as geopolitical risk fades and inventories build unexpectedly. Medium-term focus will shift to how Russian supply evolves post-ceasefire and how OPEC+ manages quota discipline. While reduced upstream investment provides some support for the lower bound, oil prices are still more likely to drift within a low-range consolidation without a strong demand catalyst.