Oil heads for second weekly loss on lingering oversupply concerns

LONDON: Oil prices rose on Friday but remained on track for a second consecutive weekly loss after three days of declines on worries about excess supply and slowing US demand.

Brent crude futures rose 60 cents, or 1%, to $63.98 a barrel by 0904 GMT. US West Texas Intermediate crude was up 61 cents, or 1%, at $60.04.

Both benchmarks are poised to register weekly declines of more than 1.5% as leading global producers raise output.

“The market continues to weigh a rising oil surplus against mixed macro,” said SEB analyst Ole Hvalbye.

An unexpected US inventory build of 5.2 million barrels reignited oversupply fears this week, said IG Markets analyst Tony Sycamore.

“This has been amplified by risk-aversion flows, bolstering the dollar, and the ongoing US government shutdown, which continues to cloud economic activity,” he added.

US crude stocks rose more than expected on higher imports and reduced refining activity while gasoline and distillate inventories declined, the Energy Information Administration said on Wednesday.

Concern over the effects of the longest government shutdown in US history also pressured oil prices.

The Trump administration has ordered flight reductions at major airports because of a shortage of air traffic controllers while private reports are pointing to a weaker US labour market in October.

The Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, decided on Sunday to increase output slightly in December.

However, the group also paused further increases for the first quarter of next year, wary of a supply glut.

The well-supplied market prompted Saudi Arabia, the world’s top oil exporter, to announce a sharp reduction to prices for its crude for Asian buyers in December.

European and US sanctions on Russia and Iran, meanwhile, are disrupting supplies to the world’s largest importers, China and India, providing some support for global markets.

China’s crude imports in October rose 2.3% from September and were up 8.2% from a year earlier at 48.36 million tons, customs data showed, against a backdrop of high utilisation rates at refineries in the world’s largest oil importer.

Swiss commodities trader Gunvor said on Thursday that it had withdrawn its proposal to buy the foreign assets of Russian energy company Lukoil after the US Treasury called it Russia’s “puppet” and signalled that Washington opposed the deal.

“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 at oil market analysis provider Vanda Insights.