Oil Rises as Trump, Zelenskiy Talks and Middle East Tensions Continue

Global oil prices rose on December 29 as markets digested comments from a weekend meeting between U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskiy and monitored geopolitical risk in the Middle East that could threaten supply. At 0443 GMT, Brent crude futures traded at $61.27 per barrel, up $0.63 or 1.04 percent. U.S. West Texas Intermediate crude traded at $57.32 per barrel, up $0.58 or 1.02 percent, Reuters reported on December 29.

The intraday rebound followed a steeper slide at the end of the prior week, when both benchmarks fell more than two percent amid concerns about a looming global supply glut and the prospect that progress toward a Ukraine peace deal could shave the geopolitical risk premium out of prices. Markets positioned around the outcome of the weekend talks, after President Trump said he and Zelenskiy were "getting a lot closer, maybe very close" to an agreement to end the war, while acknowledging that the fate of the disputed Donbas region remained unresolved.

Traders also said that tensions across the Middle East continued to underpin crude, providing a floor to prices despite recent oversupply worries. The region remains a source of potential supply disruption, and even tentative signals of escalation can prompt rapid repositioning by oil funds and physical traders. That sensitivity helps explain why modest political developments can swing prices by a percentage point or more within a trading day.

Analysts cited a range of other supply side risks that could keep oil markets jittery. Tony Sycamore of IG Markets said he expected WTI to trade within a $55 to $60 range and warned markets were watching for U.S. enforcement actions against Venezuelan shipments and any fallout from a U.S. military strike against ISIS targets in Nigeria. Nigeria produces about 1.5 million barrels per day, a scale that makes any disruption there economically meaningful for global balances.

The recent price dynamics highlight several intersecting forces shaping oil markets. On the demand side, a potential easing of the Ukraine conflict could reduce precautionary buying by traders and lower the geopolitical risk premium embedded in crude prices. On the supply side, persistent production growth in several regions has raised inventory concerns, which contributed to last Friday’s drop of more than two percent. Meanwhile, episodic supply shocks from conflict or sanctions remain a tail risk that supports prices above levels that would prevail in a comfortable global surplus.

For investors and policymakers, the immediate implication is continued volatility. Energy sector equities and commodity sensitive currencies are likely to remain responsive to headlines about diplomacy, military action, and enforcement of sanctions. For central banks, swings in oil can complicate near term inflation readings, keeping inflation monitoring and forward guidance central to policy deliberations as markets move into the new year.