Oil Heads for Deepest Annual Loss Since 2020 on Surplus Concerns

Commodity

Summary:

Oil is set for its biggest annual loss since 2020 as global oversupply deepens, OPEC+ raises output, and demand lags, leaving prices pressured despite ongoing geopolitical risks.

Oil (CL=F) headed for its steepest annual loss since the start of the pandemic in 2020, in a year that has been dominated by geopolitical risks and steadily rising supplies across the globe. A punishing surplus is expected to weigh on prices in 2026.

Brent steadied above $61 a barrel on Wednesday, with prices down 18% this year. Traders’ near-term focus is on an OPEC+ meeting at the weekend, a bearish US industry report, and President Donald Trump’s policies toward major producers Russia, Iran and Venezuela.

Global oil markets have been been oversupplied this year. Both the International Energy Agency and the US government see production exceeding consumption by just over 2 million barrels a day in 2025 and that surplus worsening in the coming year.

OPEC+ roiled markets earlier this year by reversing its longstanding policy of defending prices and raised output, seeking to reclaim market share as countries including Brazil and Guyana boosted supply and the US pumped at record levels. The producer group is expected to hold off on output hikes during talks this weekend.

Oil Heads for Deepest Annual Loss Since 2020 on Surplus Concerns_1

The drop in crude has helped to reduce inflationary pressures, helping central bankers as they seek to contain price gains. The US Federal Reserve cut rates three times in 2025, and minutes from policymakers’ last meeting showed most officials saw more reductions as appropriate. Still, it also threatens to reshape the budgets of major oil-producing nations and companies.

“The oil market is set to remain oversupplied into 2026, with strong non-OPEC production from the US, Brazil, Guyana and Argentina outpacing uneven global demand,” said Kaynat Chainwala, an analyst at Kotak Securities Ltd. Prices should stay range-bound between $50 and $70, with risks over Venezuelan or Russian supply remaining supportive, she added.

China Storage

Despite the drop this year, a clutch of factors have ensured that crude futures haven’t fallen further. Prices held within a range above $65 for much of the summer in spite of the swelling production, as much of the oversupply ended up in storage tanks in China, far away from the pricing hubs for crude futures. In contrast, western facilities remained relatively empty, with the tank farms at Cushing, Oklahoma — the pricing point for West Texas Intermediate futures — heading for its lowest annual average storage level since 2008.

Output of gassy types of oil like propane has also soared as US shale fields produce lighter types of fuel. Those volumes also have limited impacts on crude pricing.

Geopolitics will also drive the market outlook into next year. The US is driving efforts to end the war in Ukraine, an outcome that could help ease the volume of Russian oil building up at sea. The US is also seizing tankers carrying Venezuelan cargoes, and the south American nation has had to reduce output in recent days as a result.

Trump also said this week that he would strike Iran again if it rebuilds its nuclear program. Brent futures surged above $80 after he authorized attacks on Iran earlier this year but slid rapidly when it became clear the conflict was ending.

Source: Bloomberg

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Glendon

Forex

Economic

Applications for US unemployment benefits fell last week to one of the lowest levels this year, accentuating volatility in the data during the holiday season.

Initial claims decreased by 16,000 to 199,000 in the week ended Dec. 27, according to Labor Department data released Wednesday. That was lower than all estimates in a Bloomberg survey of economists and one of just a handful of readings below 200,000 since early 2024.

The figures have been volatile recently, as is typical at this time of year. The latest period included Christmas, as well as the newly declared federal holidays of Dec. 24 and 26.

Applications for unemployment benefits jumped at the beginning of the month after falling to a three-year low around Thanksgiving in the week prior. The four-week moving average of initial applications, a metric that helps smooth out volatility, ticked up to 218,750.

Continuing claims, a proxy for the number of people receiving benefits, decreased to 1.87 million in the previous week. That was also one of the lowest readings in recent months.

The US has seen sluggish hiring through much of this year, which has eroded Americans' views of their employment prospects. Meantime, the unemployment rate has climbed to a four-year high, even as layoffs remain relatively limited.

A report from the Conference Board last week showed more Americans think jobs are hard to get, and the share saying jobs are plentiful is decreasing. Economists expect the unemployment rate to remain elevated throughout 2026.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

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Michelle

Forex

Economic

India is set to sustain high economic growth and authorities will take measures to shield it from potential shocks due to volatility in the global economy, the central bank said.

The economy remains "robust and resilient," supported by strong domestic demand growth, benign inflation and healthy corporate balance sheets, Reserve Bank of India Governor Sanjay Malhotra said in the central bank's bi-annual Financial Stability Report released on Wednesday.

"Nonetheless, we recognize the near-term challenges from external spillovers and continue to build strong guardrails to safeguard the economy and the financial system from potential shocks," he said

India's foreign exchange reserves, at nearly $695 billion, are the world's fourth largest and cover more than 11 months of imports. The central bank uses the reserves to smooth volatility in the exchange rate, which has intensified amid delays in a trade deal with the US, India's largest export market.

The RBI cut its policy rate to a more than three-year low earlier this month to support growth and offset the impact of punitive US tariffs on Indian shipments. It also signaled an intention to cut rates further if inflation remained soft even as it injected substantial liquidity into bond markets to ease borrowing costs.

Uncertainty over an agreement with Washington has pressured the rupee, which has tumbled nearly 5% this year. The economy grew a robust 8.2% in the July–September quarter but the outlook remains clouded by global factors.

Stress tests on Indian banks showed that asset quality may improve, as lenders have adequate capital to withstand potential stress, the report said.

Bad loans at 46 Indian banks are likely to drop to a multi decade low of 1.9% of total advances by March 2027 from 2.1% in September this year, according to the report. Even under adverse and severe stress scenarios, asset quality is expected to remain relatively healthy at 3.2% and 4.2%, respectively.

The capital adequacy ratio of banks, a key measure of financial strength, may decline to 16.8% by March 2027 from 17.1% in September 2025, the RBI said. While the ratios worsen under adverse scenarios, "none of the banks would fall short of the minimum Capital to Risk-Weighted Assets Ratio requirement of 9% even under the adverse scenarios."

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Stocks

U.S. stock index futures moved lower on the last trading day of 2025, but were set to wrap up a roller-coaster year characterized by uncertainty over President Donald Trump's tariffs and unrivalled euphoria around AI with robust gains.

The S&P 500 and the Dow are set to close their eighth consecutive month in the green, bolstered by an insatiable appetite for AI stocks that pushed all three indexes to record highs this year.

But their yearly performances were still on track to be lower than the rally in the last two years as Trump's "Liberation Day" tariffs sparked a meltdown in global markets in April, also casting a cloud over the future of monetary policy in the world's biggest economy.

Investors diversified from U.S. stocks earlier in the year, but the frenzy to capitalize on the AI euphoria helped the S&P 500 overtake the European STOXX 600 (.STOXX) for the year.

Communication services stocks (.SPLRCL) on the S&P 500 are set to outperform this year, on the back of an over 65% jump in Alphabet (GOOGL.O), which is set for its best yearly performance since 2009.

The company is close to hitting $4 trillion in market capitalization and has seen numerous catalysts this year in the form of AI deals, Berkshire Hathaway's $4.9 billion stake and an antitrust ruling win against breaking up the Google parent.

Analysts expect growth to broaden across sectors in 2026, partially attributing it to Trump's "One Big Beautiful Bill" passed by the U.S. government, that could accelerate corporate earnings.

At 05:31 a.m. ET, Dow E-minis were down 68 points, or 0.14%, S&P 500 E-minis were down 17.25 points, or 0.25% and Nasdaq 100 E-minis were down 89.25 points, or 0.35%.

Wall Street's main indexes closed lower on Tuesday, marking their third consecutive session in the red, at a time when investors eye the "Santa Claus rally", a seasonal phenomenon where the S&P 500 typically posts gains in the last five trading days of the year and the first two in January, according to Stock Trader's Almanac.

The Federal Reserve's interest rate trajectory will set the tone for global markets heading into 2026, after mild economic data this month and expectations of a new dovish Fed chair prompted investors to price in further reductions, despite policymakers urging caution.

Among stocks, Nike (NKE.N) gained 1.9% in premarket trading after Elliott Hill bought stock for about $1 million.

Vanda Pharmaceuticals (VNDA.O) jumped 18.7% after the U.S. Food and Drug Administration approved its drug for the prevention of motion-induced vomiting .

Trading is expected to be thin in the holiday-shortened week, as markets will be closed on Thursday.

Source: reuters

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Adam

Stocks

OPENING CALL

Stock futures were down on Wednesday but were on track to end the year at near record highs.

The Dow industrials is up 14% for the year to date and the Nasdaq composite is 21% higher.

"The stock market is essentially treading water right now, and we're probably going to have more of this low-volume trading action on Friday, the day after New Year's Day," said Navellier & Associates.

Investors were weighing the Federal Reserve's last meeting minutes released on Tuesday , which showed some officials were reluctant to support further interest rate cuts in the near future.

The Fed cut rates by 25 basis points this month but some officials indicated that the decision was finely balanced or that they could have supported keeping rates unchanged. Most members thought rates could fall eventually if inflation declines.

Citi analysts expect rates will fall as focus increasingly switches to employment risks and away from inflation risks .

Weekly data on initial unemployment-insurance claims are due at 8:30 a.m. ET. Jobless claims are expected to tick higher to 220,000 from 214,000, in a WSJ consensus.

Metals prices were falling early Wednesday, with silver futures down nearly 9%. Despite this week's volatility, gold remains on track to gain 65% over the past 12 months while silver notched its largest single-day gain on record Tuesday.

Meanwhile, Hong Kong stocks ended 2025 with a second consecutive annual gain , posting their best performance since 2017 in percentage terms.

U.S. stock and bond markets will wrap up the year today, then close on Thursday in observance of New Year's Day.

Watch For:

Weekly Jobless Claims; EIA Weekly Petroleum Status Report

Today's Top Headlines/Must Reads:

How Meta's Newest Acquisition Target Got Around Worries Over Its Ties to China

Bankers Are Gearing Up for Another Onslaught of Monster Deals in 2026

OpenAI Is Paying Employees More Than Any Major Tech Startup in History

MARKET WRAPS

Forex:

The dollar rose to its highest in over a week against a basket of currencies. The greenback was set to record its worst annual performance since 2017 and faces further weakness next year, MUFG Bank said.

The euro fell against the dollar on the last day of 2025 but remains on track for a strong annual performance.

Sterling fell to a nine-day low versus a stronger dollar but trades steady against the euro in the absence of U.K.-specific catalysts.

Bonds:

Treasurys edged lower, even after Fed minutes showed some policymakers were cautious about further near-term interest-rate cuts.

Energy:

Oil nudged down as traders close out a year in which oversupply fears pushed the commodity lower, despite ongoing geopolitical tensions.

Metals:

Gold fell as the precious metal limped over the line of a record-breaking year.

The precious metal has gained around 65% this year. The rally "not only reflected deep macroeconomic concerns but also pushed gold into a high valuation zone , making the market more sensitive to short-term corrective factors," said XS.

Silver

Silver futures fell after exchange operator CME Group increased margin requirements for the second time in a week.

Iron

Iron ore fell. Seasonal shipments at the year-end have resulted in accumulating port inventories, putting downside pressure on prices , Nanhua Futures said.

TODAY'S TOP HEADLINES

How Meta's Newest Acquisition Target Got Around Worries Over Its Ties to China

Workers at Butterfly Effect, an artificial-intelligence startup with Chinese roots, gathered in March to count down to the launch of a demo of a new AI-powered tool called Manus.

Released in the shadow of DeepSeek, a China-built AI model that rocked the U.S. market in January owing to its advanced capabilities and low cost, Manus became an overnight hit. The product, which used models from Anthropic and others to produce detailed research reports and perform a host of other tasks, showcased the talents of China's entrepreneurs and startups in a burgeoning global battle for AI supremacy.

OpenAI Is Paying Employees More Than Any Major Tech Startup in History

OpenAI is paying employees more than any tech startup in recent history, according to financial data it has shown investors.

The company's stock-based compensation is about $1.5 million per employee, on average, across its workforce of roughly 4,000.

Bankers Are Gearing Up for Another Onslaught of Monster Deals in 2026

Megadeals returned in full force in 2025. Wall Street is already bracing for another wave in 2026.

There were a record 68 transactions valued at $10 billion or more announced globally this year, according to data from LSEG going back to 1980. That drove the average annual deal size to a new high of nearly $227 million.

Hong Kong IPO Momentum Builds as Six Chinese Firms Seek to Raise Over $2.0 Billion

The frenzy for Hong Kong listings is gathering pace, with six more Chinese firms targeting to raise over US$2 billion in January, raising hopes of another blockbuster year for the market.

The companies, spanning from artificial intelligence to chip designers and biopharmaceuticals, aim to raise around 16.6 billion Hong Kong dollars, equivalent to US$2.13 billion, according to filings to Hong Kong's exchange operator on Wednesday.

Hong Kong Stocks Log Best Year Since 2017 as AI Boom Fuels Tech Rally

Hong Kong stocks ended 2025 with a second consecutive annual gain, posting their best performance since 2017 in percentage terms, thanks to a tech rally fueled by artificial intelligence.

The city's benchmark Hang Seng Index finished the year up 28%, making it one of Asia's best performing markets.

China's Factory Activity Gauges Signal Return to Growth

China's factory activity signaled a return to growth in December, according to both official and private surveys, an improvement likely to help Beijing achieve its growth target for the year.

The official manufacturing purchasing managers index rose to 50.1 for December from 49.2 in November. The reading topped the 49.4 forecast from economists surveyed by The Wall Street Journal and ended an eight-month run below the 50 mark that separates expansion and contraction.

China's 'Invisible' Stimulus Is Here. Why It's Easy to Miss.

For much of the past year, global investors have been waiting for China to do something dramatic: a massive fiscal package, a sweeping consumer giveaway, a decisive interest-rate cut signaling Beijing is serious about reviving growth.

None has arrived. And that absence has helped cement a prevailing narrative: China isn't stimulating, and without a big push, its economy will continue to drift.

Oil Tanker Pursued by the U.S. Appears to Claim Russian Protection

The pursuit of the Bella 1, an aging oil tanker that has been evading the U.S. Coast Guard for nearly two weeks, was complicated after a Russian flag was sloppily painted on the side of the vessel in an apparent attempt to claim protection from Moscow, according to senior U.S. officials.

Coast Guard vessels have been tracking the very large crude carrier through the Atlantic Ocean, staying about a half-mile behind, according to the officials. They said that they are in a position to seize the tanker should the White House give the green light to proceed, more than 10 days into a pursuit that began around Venezuelan waters.

Russia Doubles Down on Allegations Ukraine Targeted Putin Residence

It is known as Dolgiye Borody, or Long Beards, and it is one of Russian President Vladimir Putin's favored official residences, built on a lake shore in the country's northwest. In the past, it was used by Soviet leaders Joseph Stalin and Nikita Khrushchev.

The Kremlin has alleged that Ukrainian drones targeted the well-protected site in Novgorod and is using its claim to justify a hardening of its stance in peace negotiations. The Kremlin on Tuesday declined to provide any evidence to back up its assertions.

Five Challenges Mamdani Faces on Day 1 as NYC Mayor

After Zohran Mamdani takes over running the country's largest city on Thursday, the 34-year-old Democratic socialist and relative political newbie will face a series of crucial early tests.

As New York City mayor, Mamdani plans to move forward with delivering on an ambitious affordability agenda while overseeing a vast municipal bureaucracy. Wall Street and real estate bigwigs have serious concerns that his administration will enact policies that upend the city's economy and reverse a recent crime drop. Meanwhile, his backers on the left expect him to deliver on his promise to freeze rents, create a free bus service and expand free child care.

Trump Administration Freezes Child Care Funding to Minnesota Amid Fraud Probes

The Trump administration said Tuesday it is freezing federal child-care funding to Minnesota following allegations of yearslong fraud schemes involving the state's social-services system.

"We have turned off the money spigot," Jim O'Neill, the deputy secretary at the Department of Health and Human Services, posted in a statement on X with an accompanying video.

Source: morningstar

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Glendon

Cryptocurrency

Bitcoin (BTC) is nearing the end of a six-week consolidation phase. The asset has been moving within a tight symmetrical triangle, and traders are now watching for a breakout or breakdown. As of press time, it is trading at around $88,500, showing a slight rise over the last 24 hours.

Price Structure Signals Pressure Build-Up

For the past month and a half, Bitcoin has been forming a symmetrical triangle, which reflects a balance between buyers and sellers, with the range narrowing each week. The current setup indicates that the price is approaching a point where this balance will end, likely with a sharp movement in either direction.

Analyst The Swing Trader posted,

"Bitcoin has been forming a very tight pennant for the last 6 weeks… A breakout targets a 15% move into $100K resistance."

Based on the triangle's range, a breakout could send Bitcoin as high as $100,500. A breakdown, on the other hand, could lead to a 15% drop toward $75,000.

Meanwhile, Titan of Crypto shared a chart showing Bitcoin in a clear accumulation range between $80,000 and $94,000. The post explained that short-term direction may depend on which liquidity area is taken first, above or below the range.

"If the upper pool is taken first, odds of bearish continuation increase," the post said.

Some traders expect a move lower before any lasting recovery. Jason Pizzino offered a similar short-term view, pointing to a bear flag pattern following the recent decline. If this pattern breaks to the downside, it could send Bitcoin into the $70,000–$76,000 range.

Large Buyers Add to Bitcoin Holdings

Despite quiet retail interest, institutional activity has continued. Lark Davis reported that public companies now hold more than 1.09 million BTC, or around 5.1% of the supply. Strategy, which recently added 1,229 BTC, now holds 672,497 BTC in total. Metaplanet purchased another 4,279 BTC in December, bringing its total to 35,102.

Other firms, including Bitdeer Technologies, Anap Holdings, and Cango Inc., have also made purchases. These investments come as the market remains uncertain near the $88,000 mark, with no clear breakout yet.

Technical Momentum Offers Conflicting Clues

Some market indicators are beginning to shift. Ash Crypto posted that the MACD is now at levels last seen during the 2022 low and is showing a bullish divergence. This may suggest that downward pressure is fading. Still, the price has struggled to stay above $90,000 in recent weeks.

A long-term forecast from Dragonfly's Haseeb Qureshi sees potential for Bitcoin to reach $150,000 by 2026. For now, BTC remains compressed within its triangle, and traders are watching for a move that could set the tone for early 2026.

Source: CryptoSlate

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Adam

Stocks

MARKET WRAPS

Stocks:

European shares fell on Wednesday with most markets either open for a half-day of trading or closed as 2025 wraps up.

Investors are still digesting the Federal Reserve's December meeting minutes released on Tuesday , which showed that some officials were reluctant to support more interest-rate cuts in the near future.

Rates are still expected to fall in 2026, especially as Trump is set to appoint a replacement to Fed Chair Jerome Powell who favors reducing rates. U.S. money markets price a 17% chance of a January rate cut and a 53% chance of a March reduction, but still price two 25 basis-point cuts over 2026, LSEG data shows.

Elsewhere, China's economy was on track to reach its 2025 growth target as its PMIs beat expectations in the final month of 2025, Citi said.

Metals prices dropped early Wednesday, but gold remained poised to record its largest net gain in a single year, rising by around 65% over the past 12 months. Silver fell nearly 8% after reaching its largest single-day gain on record Tuesday.

U.S. stock and bond markets will wrap up the year today, then close on Thursday in observance of New Year's Day.

U.S. Markets:

Stock futures were down but remained close to end the year at record highs. The three main gauges have edged lower for the last three sessions, and look poised to do so again on Wednesday.

Forex:

Sterling fell to a nine-day low versus a stronger dollar but traded steady against the euro in the absence of U.K.-specific catalysts.

Bonds:

Treasurys edged lower, even after Fed minutes showed some policymakers were cautious about further near-term interest-rate cuts.

Energy:

Oil nudged down as traders end a year in which oversupply fears pushed the commodity lower, despite ongoing geopolitical tensions.

Metals:

Gold fell as the precious metal limped over the line of a record-breaking year.

Silver

Silver futures fell after exchange operator CME Group increased margin requirements for the second time in a week.

Iron

Iron ore fell. Seasonal shipments at the year-end have resulted in accumulating port inventories, putting downside pressure on prices , Nanhua Futures said.

EMEA HEADLINES

Ukraine Now Has Europe's Biggest Military. What Happens to It When the War Ends?

When the war with Russia eventually ends, Ukraine will be left with a military larger and with more recent experience than any of its European backers'.

Whether it can outlast Russia's long-term designs in the event of any peace deal is a question for the entire continent, which now sees Ukraine as a bulwark against Moscow's ambitions.

Russia Doubles Down on Allegations Ukraine Targeted Putin Residence

Oil Tanker Pursued by the U.S. Appears to Claim Russian Protection

Gulf Rivals Saudi Arabia, U.A.E. Come to Blows in Yemen

Tensions between U.S. allies Saudi Arabia and the United Arab Emirates flared Tuesday, when the kingdom warned its Gulf rival against endangering its security and said it would take all necessary measures to counter the threat.

The fast-escalating dispute was spurred by fighting in the two-thirds of Yemen controlled by forces opposed to the Iran-backed Houthi militia, which rules over the rest. U.A.E.-backed forces there have outmaneuvered rivals backed by Saudi Arabia to take control of energy-rich territory along the kingdom's border.

GLOBAL NEWS

U.S. Stocks Defy 'Sell America' Warnings and Are Ending 2025 Near Record Highs

The U.S. stock market is closing out 2025 near a record high, with the S&P 500's 17% gain vaulting the index toward its seventh-best three-year run on record.

The yearslong rally appeared to end abruptly in the spring with the rollout of President Trump's "Liberation Day" tariffs and the emergence of "Sell America" trades that bet on the U.S.'s retreat from the world stage, only to roar back to life within weeks.