Oil Extends Losses Amid Supply and Demand Fears

On Friday, the price of oil rose, following three days of declines due to concerns about excessive supply and slowing demand in the US. Prices appeared to be headed for the second week of losses.

Data shows Brent crude futures rising by 21 cents, or 0.33%, to $63.59 a barrel at 0149 GMT. 0.37% or 22 cents, $59.69 per barrel is for West Texas Intermediate crude. As global producers increase output, Brent and WTI are expected to fall by about 2% this week, marking a second consecutive week of declines.

The consecutive weekly losses and falling overall market supply are due to rising global supplies and concerns over weakening demand globally.

According to IG Market analyst Tony Sycamore, the price drop of 5.2 million barrels of US inventory has again reignited the fear of oversupply. He stated, “This has been amplified by risk-aversion flows, bolstering the dollar and the ongoing U.S. government shutdown, which continues to cloud economic activity.”

On Wednesday, U.S. crude oil stocks increased due to higher imports and lower refining, while gasoline and distillate inventories declined. Concerns over the longest U.S. government shutdown, which is affecting the economy, also pressured oil prices.

The Trump admin ordered flight cuts at major airports amid air traffic controller shortages, and private reports show a weaker October U.S. labour market. Sycamore predicts that WTI will remain in the $58-$62 range in the short term. A potential upside is the U.S. reopening within a week, but persistent builds and weak demand will limit gains,” he said.

OPEC+ decided to slightly increase December output but paused further increases in Q1, wary of a glut. After the decision, Saudi Arabia cut oil prices for Asian buyers in December due to a well-supplied market.

Due to European and US sanctions on Russia and Iran, supplies to the world’s largest importers are being disrupted, while China and India are providing some support to global markets. 

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