Oil prices fall nearly 2% on oversupply and weaker US demand

LONDON: Oil prices fell on Thursday, pressured by concerns over softening U.S. demand and broad oversupply that offset threats to output from conflict in the Middle East and the Russian war in Ukraine.

Brent crude futures were down $1.13, or 1.7%, at $66.36 a barrel by 1319 GMT while U.S. West Texas Intermediate crude futures lost $1.16, or 1.8%, to $62.51.

“Oil prices are falling today in response to bearish IEA headlines, which suggest massive oversupply on the oil market next year,” said Commerzbank analyst Carsten Fritsch.

The International Energy Agency said in its monthly report that world oil supply will rise more rapidly than expected this year on OPEC+ increasing output further.

However, the OPEC report published after the IEA’s kept non-OPEC supply and demand forecasts for the year unchanged, citing steady demand.

The Organization of the Petroleum Exporting Countries and allies, a group collectively known as OPEC+, on Sunday decided to raise production from October.

The market was torn between perceived supply shortage due to a rise in tensions in the Middle East and Ukraine and actual oversupply from higher OPEC+ production and swelling stocks, said PVM Oil Associates analyst Tamas Varga.

Saudi Arabia’s crude oil exports to China are set to surge in October, several trade sources told Reuters on Thursday, with Aramco shipping about 1.65 million barrels per day in October, compared with 1.43 million bpd allocated in September.

In the U.S., crude inventories rose by 3.9 million barrels in the week to September 5, the Energy Information Administration said, against expectations of a draw of 1 million barrels.

The market was also questioning how long China could continue to absorb barrels and keep OECD inventories low, said UBS analyst Giovanni Staunovo, adding that investors were also watching for further sanctions affecting Russian oil.

U.S. energy secretary Chris Wright and EU energy commissioner Dan Jorgensen discussed efforts to restrict Russian energy trade in Brussels, with Jorgensen saying that the bloc’s planned deadlines were ambitious but there is a need to speed the process.

Going into 2026, the overall oil market might register a hefty surplus, said Ole Hvalbye at SEB Research, adding that demand appears to be holding up and could potentially absorb the increased OPEC+ output.