Published by Global Banking & Finance Review®
Posted on January 2, 2026
3 min readLast updated: January 20, 2026
Add as preferred source on GoogleOil prices dropped on 2026's first trading day, marking the largest annual loss since 2020, amid geopolitical tensions and oversupply concerns.
By Arathy Somasekhar
HOUSTON, Jan 2 (Reuters) - Oil prices settled lower on Friday on the first trading day of 2026 after registering their biggest annual loss since 2020, as investors weighed oversupply concerns against geopolitical risks, including the war in Ukraine and Venezuela exports.
Brent crude futures closed down 10 cents to $60.75 a barrel, while U.S. West Texas Intermediate crude eased 10 cents to $57.32.
Russia and Ukraine traded allegations of attacks on civilians on New Year's Day despite talks overseen by U.S. President Donald Trump, aimed at ending the nearly four-year-old war. Kyiv has been intensifying strikes against Russian energy infrastructure, aiming to cut off Moscow's sources of financing for its military campaign.
The Trump administration ratcheted up pressure on Venezuelan President Nicolas Maduro on Wednesday, imposing sanctions on four companies and associated oil tankers it said were operating in Venezuela’s oil sector. Maduro said in a New Year's interview that his country is willing to receive U.S. investment in its oil sector, coordinate in the fight against drug trafficking and hold serious talks with the United States.
Trump also threatened to aid protesters in Iran if security forces fire on them, days into unrest that has left several dead and posed the biggest internal threat in years to Iranian authorities.
"Despite all these geopolitical concerns, the oil market seems unmoved. Oil prices are locked in this long-term trading range, and there’s a sense that the market is going to be well supplied no matter what happens," said Phil Flynn, senior analyst with the Price Futures Group.
In the Middle East, a crisis between OPEC producers Saudi Arabia and the United Arab Emirates over Yemen has deepened after flights were halted at Aden's airport on Thursday.
OPEC+, the Organization of the Petroleum Exporting Countries and allied producers, is due to meet on Sunday. Traders widely expect the group to continue pausing output increases in the first quarter, said Sparta Commodities analyst June Goh.
"2026 will be an important year on assessing OPEC+ decisions for balancing supply," she said, adding that China would continue to build crude stockpiles in the first half, providing a floor for oil prices.
The Brent and WTI benchmarks each lost nearly 20% in 2025, the steepest since 2020. It was the third straight year of losses for Brent, the longest streak on record.
Phillip Nova analyst Priyanka Sachdeva said the muted price movement reflected a struggle between short-term geopolitical risks and longer-term market fundamentals that point towards oversupply.
(Reporting by Arathy Somasekhar, Stephanie Kelly and Florence TanEditing by David Gregorio and Lisa Shumaker)
Brent crude is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for oil prices globally and is used to price two-thirds of the world's crude oil.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from the U.S. and is known for its light and sweet characteristics, making it desirable for refining.
The Organization of the Petroleum Exporting Countries (OPEC) is a group of oil-producing countries that coordinate their oil production policies to manage oil prices and ensure a stable supply of oil to the market.
Oversupply in the oil market occurs when the production of oil exceeds the demand for it. This can lead to falling prices and can be caused by various factors, including increased production or decreased consumption.
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