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Highlights
- Oil prices on track for largest weekly drop in over a month.
- US oil inventories decreased, but production hit record levels.
- Brent and WTI show significant weekly declines due to demand outlook adjustments.
Crude oil prices experienced a modest increase on Friday, spurred by a surprise drop in US oil inventories and heightened tensions in the Middle East. Despite these developments, both Brent crude (LCOc1) and West Texas Intermediate (WTI) crude (CLc1) are set to record their largest weekly losses in over a month due to growing concerns about demand and rising production levels.
On Friday, Brent crude rose by 0.2%, settling at $74.61 per barrel, while WTI crude saw a similar 0.2% rise, reaching $70.84 per barrel. These gains followed a higher close on Thursday, marking the first increase in five days. The Energy Information Administration (EIA) reported a decrease in US crude, petrol, and distillate inventories, providing temporary support to prices.
However, despite the inventory reduction, US crude production reached a record level of 13.5 million barrels per day last week, according to the EIA. This heightened production adds to concerns about oversupply, particularly as output in Libya resumes, and OPEC and its allies, collectively known as OPEC+, plan to gradually unwind production cuts by 2025.
Brent crude and WTI crude are both poised to decline by approximately 6% this week, marking the most significant weekly drop since early September. The drop in prices follows updated forecasts from OPEC and the International Energy Agency (IEA), which adjusted their outlook for global oil demand for both 2024 and 2025. The revised forecasts reflect a less optimistic view on future demand, adding further pressure on the oil market.
In addition to demand concerns, easing geopolitical tensions also contributed to this week’s drop in oil prices. Earlier fears of a potential retaliatory strike by Israel on Iran, which could have disrupted Tehran’s oil exports, have subsided, reducing some of the risk premium that had previously been factored into oil prices.
As oil production remains strong and demand forecasts face downward adjustments, the energy market may continue to experience volatility in the coming weeks. While the decline in inventories provided some short-term price support, the broader concerns about oversupply and demand outlook are expected to weigh on crude oil prices.
