Oil Markets Struggle as Russia Peace Talks and China’s Stockpiling Shift Dynamics

Oil markets are experiencing a significant downturn, marked by widespread concerns over oversupply and declining global demand indicators. As of Thursday’s trading session, Brent crude for January delivery was priced at $63.10 per barrel, showing little change from $62.97 a week earlier. Meanwhile, West Texas Intermediate (WTI) crude saw a slight increase to $58.70 per barrel, up from $58.46. The recent surge in oil product prices has also subsided, with the ICE Gasoil-Brent crack declining from a peak of $35.84 per barrel on November 18 to approximately $26 per barrel.

Market sentiment is heavily influenced by the ongoing conflict in Ukraine, with any potential progress towards a ceasefire likely to ease stringent U.S. sanctions on Russian oil producers. The Trump administration has introduced a new 19-point peace plan that is more favorable to Ukraine compared to the original proposal. Key amendments include stipulations against the free handover of the Donbas region to Russia, the removal of an automatic veto on Ukraine’s NATO membership, and a commitment to uphold Article 5 protections for Ukraine, which would obligate U.S. intervention in future conflicts. Notably, the initial proposal’s provision for full amnesty for war crimes has been eliminated.

China’s Strategic Crude Oil Stockpiling

China continues to dominate as the leading importer of Russian crude oil, with imports surging by 275.6 thousand barrels per day (kb/d) in recent months, reaching approximately 2.15 million barrels per day (mb/d). Overall, China’s crude imports have risen by 866 kb/d year-on-year, totaling 11.44 mb/d. Rystad Energy estimates that China has stockpiled over 1 million barrels per day at various times, accumulating nearly 160 million barrels in the first nine months of 2025. This buying spree is driven by concerns over energy security and the desire to capitalize on low oil prices. Analysts expect China to maintain its stockpiling efforts at least through 2026, facilitated by new legislation and infrastructure improvements that enhance storage capacity.

Despite this strategic accumulation, some analysts caution that the pace of stockpiling may slow as storage limits are approached.

Venezuelan Oil Production Outlook

Recent developments regarding U.S. intervention in Venezuela have further added to the bearish sentiment in oil markets. The Trump administration has designated the Cartel de los Soles, allegedly led by President Nicolás Maduro, as a foreign terrorist organization. This move coincides with Operation Southern Spear, which targets vessels suspected of drug trafficking in the region, linking these actions to Venezuela’s substantial oil reserves, estimated at 303 billion barrels, the largest globally.

Venezuelan oil production has sharply declined since 2017, primarily due to sanctions limiting access to financial markets. However, production has shown signs of recovery, rising from 360 kb/d in 2020 to around 1 mb/d currently, largely through black-market sales. Analysts at Standard Chartered indicate that it may take years for Venezuela to reach its peak production levels of 2.5 mb/d, last achieved between 2011 and 2015. This decline is attributed to years of underinvestment in oil fields and a significant lack of exploration drilling. Challenges such as shortages of equipment, supplies, and labor have further hindered the sector’s recovery.

The Venezuelan government, under both Hugo Chávez and Nicolás Maduro, nationalized ConocoPhillips’ oil assets in 2007, leading to significant arbitration awards totaling over $8 billion against the country. Venezuela’s efforts to annul these awards have been unsuccessful, and ConocoPhillips is now pursuing legal avenues to enforce the rulings and secure compensation from Venezuela’s remaining overseas assets, including those related to the Citgo refinery.

On the natural gas front, European markets have witnessed a decline in prices, with the front-month Dutch Title Transfer Facility (TTF) contract for December delivery settling below EUR 30 per megawatt hour (MWh) at EUR 29.5 per MWh, marking its lowest settlement in 18 months. European natural gas inventories fell by 3.76 billion cubic meters (bcm) to 91.97 bcm on November 23, representing the largest weekly decrease since late February 2025. Unseasonably mild weather forecasts for December have also contributed to the downward pressure on prices.

Conversely, U.S. gas prices have continued to rise, with futures reaching $4.6 per million British thermal units (MMBtu) due to declining inventories and anticipated increased demand. Predictions of below-normal temperatures over the next two weeks are expected to further boost demand. Additionally, U.S. liquefied natural gas (LNG) exports have reached record levels, averaging 18 billion cubic feet per day (bcfd) in November, up from 16.6 bcfd in October.

As the oil market grapples with these complex dynamics, the interplay of geopolitical developments, supply and demand factors, and strategic stockpiling efforts will remain central to shaping future trends.