Oil Rally Faces Peace Deal Headwinds

WTI crude up 0.45% today as equity markets surge, signaling renewed confidence in global energy demand. However, gains are capped by growing optimism around a Ukraine peace settlement—potential removal of Russian sanctions could flood markets with extra supply.

The supply picture is already shifting: OPEC flipped from forecasting a 400k bpd deficit to a 500k bpd surplus for Q3, citing stronger US output and ramped OPEC production. Separately, crude stored on stationary tankers hit 114.31M barrels last week—highest in 2.25 years, another bearish signal.

One bright spot: Russian crude exports are actually contracting. Ukraine's drone campaign has knocked out 13-20% of Russia's refining capacity, while new US/EU sanctions crimp shipping. Russia's product shipments fell to 1.7M bpd in early November—lowest since 2021.

But here's the kicker—the IEA is forecasting a record 4M bpd global surplus by 2026. OPEC+ is still trying to unwind its 2.2M bpd production cuts from 2024, creating structural headwinds for prices. US crude inventories are already 5% below seasonal averages, suggesting weak demand at the margin.

TL;DR: Short-term geopolitical support (Russia sanctions, Venezuela tensions) vs. medium-term supply reality (peace = more Russian oil, US production climbing, OPEC+ adding barrels). The math favors pressure.