Oil prices continue to fall due to oversupply
12 September 09:05
On Friday, global oil prices continued to fall, adding to the significant decline of the previous day. Concerns about a possible decline in US demand and a general oversupply outweighed fears of supply disruptions due to the conflict in the Middle East and the Russian-Ukrainian war. This was reported by "Komersant Ukrainian" with reference to Reuters.
According to OilPrice.com, futures for Brent crude oil fell 43 cents (0.65%) to $65.94 per barrel as of 08:56 Kyiv time, while US West Texas Intermediate crude oil fell 47 cents (0.75%) to $61.90.
“The battle against inflation in the US does not look like it is going to be won yet, which worsens the outlook for oil demand from the world’s largest economy. Even geopolitical turmoil is not able to support oil prices, as fundamentals point to oversupply and sluggish demand,”
– said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.
US government reports released on Thursday showed that consumer prices there rose by the most in seven months in August, and the number of initial jobless claims rose sharply last week. This supports expectations that the US Federal Reserve will cut interest rates next week to stimulate economic growth. This, in turn, could boost demand for oil.
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IEA predicts supply growth
During the week, oil prices rose by up to 2% due to potential risks of disruptions in production or trade flows due to conflicts and wars. However, benchmarks began to fall sharply on Thursday and have since reversed all previous gains of the week.
The decline began after the International Energy Agency (IEA) said in its monthly report that global oil supplies will grow faster than expected this year due to OPEC’s planned production increase.
In its own report, OPEC did not change its relatively high forecasts for global oil demand growth for 2025 and 2026, saying that the global economy maintains a stable growth trend.
“The crude oil market continues to fluctuate between oversupply pressures and concerns about short-term disruption. But geopolitical concerns are providing less and less support for prices,”
– SDIC Futures said in its daily report.
OPEC increases production
On Sunday, OPEC decided to further increase its oil production quotas starting in October as the group’s leader, Saudi Arabia, seeks to regain market share.
According to several trade sources, Saudi crude oil exports to China are set to rise sharply. The state-owned energy company Aramco plans to ship approximately 1.65 million barrels per day in October, a significant increase from the 1.43 million barrels per day allocated in September.
In Russia, the second largest crude oil producer after the US in 2024, revenues from crude oil and petroleum product sales in August fell to one of the lowest levels since the start of the full-scale war with Ukraine, the IEA reported.
A report by the Energy Information Administration on Wednesday showed that U.S. crude oil inventories rose by 3.9 million barrels last week to 424.6 million barrels.
All these factors make analysts say that in the medium term, the market will be oversupplied with product, and thus prices will continue to decline.
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