Oil prices set for second straight weekly drop on signs of growing supply surplus

HOUSTON: Oil weakened on Friday, set for a second straight weekly decline, as the market weighed signs of a growing global supply surplus and Washington’s focus on blockading Iran while ramping up other economic pressures in the nine-month war.

Brent futures settled at USD95.84 a barrel, up 2 cents, or 0.02 percent. US West Texas Intermediate futures finished at USD88.56 a barrel, down 18 cents, or 0.20 percent.

For the week, Brent and WTI were both on track for a drop of about 2.5 percent. The benchmarks fell 16 percent and 13 percent, respectively, last week.

With lower geopolitical risk from the US-Israeli war against Iran and the release on Friday of an International Energy Agency report pointing to a rise in the global oil surplus, the market is going through a major shift.

“It’s clear the biggest fear a few months ago was a fear of shortage,” said Phil Flynn, senior analyst with the Price Futures Group. “Now it looks like the biggest fear is a surplus.”

Oil had a volatile trading week, with earlier hopes for a rapprochement between the US and Iran offset by strikes on Saudi Arabian infrastructure by Yemen’s Iran-backed Houthis and attacks on tankers shipping crude out of the Gulf.

US President Donald Trump said on Truth Social that a deal with Iran was not necessary to end the war. “The oil market is torn between increased supply coming out of the Middle East and that there hasn’t been any change in the negotiating positions of the United States and Iran, which is refusing to allow nuclear inspectors into their country,” said Andrew Lipow, president of Lipow Oil Associates.

The weakness in oil prices is also tied to signs of softening US demand, as rising crude oil and fuel inventories indicate a relatively subdued consumption outlook, said Sugandha Sachdeva, founder of SS Wealth Street, a New Delhi-based research firm.

US crude and fuel inventories rose last week, driven by softer refined products demand and a jump in oil imports, the Energy Information Administration said on Thursday.

Despite the easing prices, risks remain for oil shipments out of the Strait of Hormuz, the key waterway for crude exports from the main Middle East producers.