Crude oil ended 2025 with its steepest annual drop since 2020. Brent fell by 19% and WTI by 20%, closing near $60.85 and $57.42 per barrel, respectively. The dominant driver was oversupply—global production growth repeatedly outpaced consumption, leaving inventories to build through the second half of the year.

Periodic geopolitical flare-ups (Israel–Iran in June, Russia–Ukraine infrastructure strikes) briefly supported crude oil prices, but the market’s structural surplus prevailed. As per the US Energy Information Administration data, implied stock builds in the previous year were among the largest since 2020.

Supply exceeds demand

Crude oil prices in 2025 were pressured by a confluence of supply-side and structural factors. OPEC+ began unwinding earlier production cuts, adding barrels to an already soft macroeconomic backdrop, while robust non-OPEC growth—led by U.S. output at record levels—further diluted any geopolitical risk premium. Tariff and sanctions adjustments by the U.S. toward Russia, Iran, and Venezuela shifted trade flows but failed to create lasting shortages, allowing inventories to swell.

Meanwhile, China’s strong import activity largely fed strategic reserves rather than immediate consumption. This muted demand signals and cushioned sharper price declines. Adding to the imbalance, refined product inventories climbed faster than crude in several regions, compressing margins and weakening the pull on upstream demand.

Maduro’s arrest possible impact

On January 3, 2026, U.S. forces captured Venezuelan President Nicolas Maduro, flying him and his wife to New York to face narco-terrorism and drug-trafficking charges, both pleaded not guilty. The episode jolted global oil politics because Venezuela—an OPEC founder with the world’s largest proven reserves—has been constrained by sanctions, underinvestment, and operational decay.

Though the arrest may introduce political uncertainty, the immediate impact on global crude supplies remains limited. Venezuela currently produces just under 1 mb/d -less than 1% of global output- and ongoing U.S. sanctions and tanker blockades have already sharply constrained its exports.

In the short term, there may be modest supply disruption, but global inventories remain ample and projects a 3.8 mb/d surplus well into 2026. Brent oil almost unchanged and stabilized near $60–61, reflecting skepticism that political upheaval will translate into sustained supply shocks. In fact, the arrest may open doors for eventual U.S. and European investment.

Maduro’s removal may introduce short-lived volatility, but structural oversupply and constrained Venezuelan capacity will likely neutralize any significant price spike. If political stabilization and investment unfold, Venezuela’s crude output may gradually increase, which may pressure oil prices in the medium term, but the path remains slow and uncertain.