Renewed hope for a ceasefire between Russia and Ukraine has affected the oil market. ICE Brent crude fell over 0.9% to $60.56 per barrel, reaching its lowest closing price since May. US President Trump mentioned positive developments in discussions held in Berlin, but disagreements over territory are still a major obstacle to a solution. Even though Russian oil exports remain steady, finding buyers has become challenging due to sanctions. India’s imports of Russian crude are predicted to drop to around 800,000 barrels per day this month, down from 1.9 million barrels per day in November. This decreased demand has led to a rising surplus of Russian oil available at sea.

Pressure On The Oil Markets

Recent issues in the refined products market have increased pressure on oil prices. Refinery margins shot up in November due to worries over sanctions and Ukrainian drone strikes but have since fallen because of refinery maintenance and outages. Speculative buying pushed the ICE gasOil crack price to $38 per barrel in November, but it has now retreated to $23 per barrel, with speculative long positions decreasing from a peak of 102,195 lots to 58,578 lots. With Brent crude oil dropping below important support levels to a six-month low, we expect prices to continue falling in the weeks ahead. The optimism about a possible Russia-Ukraine ceasefire is a key factor here, indicating that the market’s risk premium is quickly dissipating. Traders should think about taking bearish positions, as a political agreement could cause prices to fall even more. Historically, easing geopolitical tensions have led to quick sell-offs, similar to what happened in spring 2023 when banking concerns briefly overshadowed supply worries. A confirmed ceasefire could push Brent prices down to the $50-$55 range, levels not consistently seen since mid-2024. Buying put options with strike prices around $55 for February and March 2026 offers a controlled way to profit from this expected decline. Physical market data supports this bearish outlook, showing a significant increase in unsold Russian oil at sea. Recent satellite and shipping information from early December 2025 reveals that global floating storage levels have risen by 12% from the previous quarter, indicating a notable supply surplus. This oversupply, especially with key buyers like India decreasing imports, places a strong barrier against any price increases, even if ceasefire discussions falter.

Warning Signs For Crude Prices

Weakness in refined products such as diesel and gasoline serves as another major warning for crude prices. The gasoil crack spread, which indicates refinery profitability, has plummeted from nearly $38 to $23 per barrel since late November. This drop reflects declining demand, weakening a crucial support for crude oil prices. The latest Commitment of Traders report reveals that speculative funds are rapidly reducing their bullish positions on distillates. This mass exit from a previously crowded trade is creating significant selling pressure throughout the energy sector. It’s essential to monitor these flows closely, as a continued reduction in long positions could lead to further declines in crude prices. For those willing to take on more risk, shorting front-month futures contracts is a direct approach, but caution is advisable. We recommend setting tight stop-loss orders just above the $62/bbl mark to mitigate the risk of a swift reversal if peace talks stumble. Hedging short positions with inexpensive, out-of-the-money call options may also be a wise strategy to guard against market volatility. Create your live VT Markets account and start trading now.

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