Oil prices edged higher at the start of 2026, supported by rising geopolitical risks, even as markets continued to digest the sharp losses recorded over the past year.
In early Asian trading on January 2, Brent crude rose by 0.30% to $61.03 per barrel, while U.S. West Texas Intermediate (WTI) also gained 0.30% to $57.59 per barrel.
The modest rebound followed a volatile 2025 in which both benchmarks fell by nearly 20%, marking their steepest annual decline since the pandemic-driven collapse in 2020.
Geopolitical risks support early gains
Prices found early support from escalating tensions between Russia and Ukraine. Both sides traded accusations of fresh attacks on civilians and critical infrastructure during the New Year period.
Ukrainian President Volodymyr Zelensky said on Telegram that Russia launched more than 200 drones targeting power infrastructure across seven regions. Russian authorities, in turn, reported drone strikes on energy and industrial facilities within several regions of Russia.
These developments added a risk premium to prices at the opening of the new trading year.
Venezuela sanctions add supply pressure
Additional support came from tighter U.S. measures against Venezuela’s oil sector. Washington imposed new sanctions on four companies and associated oil tankers accused of operating within Venezuela’s sanctioned crude trade.
The measures restrict affected vessels from entering or leaving Venezuelan ports, tightening export flows. As a result, state oil company PDVSA has begun shutting wells producing extra-heavy crude in the Orinoco Belt due to rising storage constraints.
Market outlook remains cautious
Despite the early gains, analysts note that global oil supply remains ample, while demand growth prospects stay uncertain. As a result, near-term geopolitical risks appear to be the main factor offsetting the broader structural pressures that weighed on oil markets throughout 2025.
For now, prices have opened 2026 on a firmer footing, but underlying market fundamentals continue to limit the scope for a sustained rally.