Oil prices made modest gains on Friday, recovering slightly after three consecutive days of losses, yet remained on track for their second weekly decline amid mounting concerns over global oversupply and softening demand in the United States.
Around 9:30 AM today, Brent crude futures rose by 28 cents, or 0.44 per cent, to trade at $63.66 a barrel, while US West Texas Intermediate (WTI) gained 29 cents, or 0.49 per cent, to $59.72, reported Reuters.
Despite the rebound, both benchmarks are down around 2 per cent for the week, extending their losing streak for a second consecutive week as major producers ramp up output.
IG Markets analyst Tony Sycamore attributed the week’s losses to a surprise surge in US crude inventories, which jumped by 5.2 million barrels. “This has been amplified by risk-aversion flows, bolstering the dollar and the ongoing US government shutdown, which continues to cloud economic activity,” he said.
US Inventory Build Sparks Oversupply Concerns
According to data from the US Energy Information Administration (EIA) released on Wednesday, crude stockpiles rose more than expected due to increased imports and reduced refining activity. Meanwhile, gasoline and distillate inventories showed a decline, offering little relief to the market.
The build-up in US inventories has reignited fears of an oversupplied market, particularly as demand signals weaken across the Atlantic. The longest-ever US government shutdown is adding to economic uncertainty, with the Trump administration ordering flight reductions at major airports due to staff shortages and reports pointing to a cooling labour market.
OPEC+ Moves Cautiously on Output
In an attempt to balance market dynamics, the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed earlier this week to modestly raise production in December. However, the group opted to pause further increases in the first quarter of next year, signalling caution amid fears of a potential supply glut.
Following the decision, Saudi Arabia, the world’s largest crude exporter, announced sharp price cuts for its December shipments to Asian buyers, reflecting a market flush with supply.
Geopolitics and Sanctions Add Complexity
Even as oversupply fears dominate sentiment, geopolitical developments are influencing trade flows. Sanctions on Russia and Iran continue to disrupt oil supplies to key markets such as China and India, providing a degree of support to prices.
In a notable development, Swiss commodity trader Gunvor withdrew its proposal to purchase foreign assets from Russian energy giant Lukoil. The decision came after the US Treasury labelled Lukoil as a “puppet” of Moscow, signalling Washington’s continued opposition to deals that could undermine its sanctions regime.
“Gunvor scrapping its Lukoil assets purchase suggests the US is maintaining its maximum pressure campaign against Russia, and potential strict enforcement of sanctions on Rosneft and Lukoil,” said Vandana Hari, founder of oil market analysis firm Vanda Insights. “The support is fragile … the oversupply narrative will likely creep back as the key influence on sentiment,” she added.
China’s Imports Remain Strong
In contrast to the weakness elsewhere, China, the world’s largest crude importer, reported robust demand in October. Customs data showed that imports rose 2.3 per cent month-on-month and 8.2 per cent year-on-year to 48.36 million tonnes, driven by strong utilisation rates at the nation’s refineries.
