Global oil markets opened the week on a cautious but firmer footing, with benchmark crude prices recovering a portion of last week’s sharp decline. The move reflects a familiar tug of war between geopolitics and fundamentals, where supply disruption risks are clashing with persistent concerns about excess supply and weakening demand visibility.

Brent crude futures rose 0.4% to $61.37 per barrel in early Asian trade, while U.S. West Texas Intermediate gained a similar 0.4% to $57.67 a barrel. The modest recovery follows a nearly 4% drop last week, driven largely by expectations that supply may remain ample well into 2025.

The immediate trigger for Monday’s uptick was escalating tension between the United States and Venezuela. Markets have been on edge since the U.S. administration seized a Venezuelan oil tanker last week, a move that has been followed by tighter enforcement actions against shipping companies and vessels linked to Venezuelan crude exports. According to shipping data and industry sources, these actions have already resulted in a sharp decline in Venezuela’s oil shipments.

Political developments within Venezuela have added to the uncertainty. Opposition leader Maria Corina Machado’s secret exit from the country to accept a Nobel Peace Prize has intensified political shockwaves, raising questions about future governance and policy continuity in a nation whose oil output is already constrained by years of underinvestment and sanctions. While Venezuela’s production is far below historical peaks, any further disruption still matters in a finely balanced global oil market.

At the same time, geopolitical risk premia linked to Russia remain fluid. Peace negotiations between Russia and Ukraine continue to oscillate between cautious optimism and renewed uncertainty. Ukrainian President Volodymyr Zelenskiy indicated a willingness to drop NATO membership aspirations during extended talks with U.S. envoys in Berlin, while U.S. officials acknowledged progress without disclosing specifics. Talks are set to continue, keeping markets alert to any breakthrough.

However, the conflict remains active on the ground. Ukraine’s military said it struck a major Russian oil refinery in Yaroslavl, northeast of Moscow, prompting a suspension of output at the facility, according to industry sources. Such attacks reinforce near-term supply risks, even as traders assess the longer-term implications of a possible peace deal.

A negotiated settlement, if it materialises, could eventually lead to higher Russian oil exports. Russian crude remains heavily sanctioned by Western nations, but any easing of restrictions would add barrels to an already well-supplied market. Reflecting current pressures, Russian state oil and gas revenues for December are expected to fall nearly 50% year-on-year to around 410 billion roubles, hurt by lower crude prices and a stronger domestic currency, as per Reuters calculations.

Despite these geopolitical developments, structural concerns around oversupply continue to dominate medium-term price expectations. Analysts point to rising non-OPEC supply and uneven global demand growth as key constraints. Tsuyoshi Ueno of NLI Research Institute noted that while geopolitical tensions are supporting prices in the short term, the lack of a clear directional driver leaves oil vulnerable. He warned that unless geopolitical risks escalate sharply, WTI could slip below $55 per barrel early next year.

On the supply adjustment front, there are early signs of discipline in the U.S. shale patch. Data from Baker Hughes showed that U.S. energy firms cut the number of active oil and gas rigs for the second time in three weeks. While this may eventually slow output growth, the impact is unlikely to be immediate enough to offset broader oversupply concerns.

For India, these developments carry mixed implications. Lower crude prices are broadly positive for the macroeconomy, easing pressure on the current account deficit, inflation, and fiscal balances. However, heightened volatility driven by geopolitics complicates planning for oil marketing companies, refiners, and downstream users. Sudden supply shocks can still trigger short-term price spikes, affecting import costs and domestic fuel pricing dynamics.

From a sectoral perspective, sustained oil prices near current levels would benefit energy-intensive industries such as aviation, logistics, chemicals, and consumer manufacturing. Conversely, upstream oil producers may face margin pressure if prices drift lower in the absence of fresh supply disruptions.