By Florence Tan
Oil prices edged higher on Friday, supported by a surprise drop in U.S. oil inventories and simmering tensions in the Middle East. However, concerns about lower demand have led prices to head for their biggest weekly loss in over a month.
Crude oil futures rose 16 cents, or 0.2%, to $74.61 a barrel while U.S. West Texas Intermediate crude was at $70.84 a barrel, up 17 cents, or 0.2%.
The Energy Information Administration (EIA) reported that U.S. crude oil, gasoline, and distillate inventories fell last week, causing both contracts to settle higher on Thursday after five consecutive sessions of decline.
Despite the inventory drop, U.S. crude production hit a record high of 13.5 million barrels per day last week, raising concerns about oversupply. Additionally, as Libyan output resumes and OPEC+ plans to unwind production cuts in 2025, worries about rising supply persist.
Brent and WTI are on track to fall around 6% this week, marking their largest weekly decline since September 2. This follows reduced forecasts for global oil demand by OPEC and the International Energy Agency. Concerns about a potential Israeli strike on Iran, which could disrupt Tehran’s oil exports, have also eased.
“Speculative positioning across the ICE Brent complex strengthened from historically low levels, on heightened geopolitical risk of a potential Israeli strike on Iran’s oil infrastructure,” Citi analysts noted.
Citi expects global oil demand to slow to 900,000 bpd in 2025 from 1 million bpd this year due to an economic slowdown and increasing adoption of electric vehicles. The potential impact of China’s economic stimulus plans on oil demand remains uncertain.
Analysis:
In summary, oil prices rose slightly due to a surprise drop in U.S. inventories and tensions in the Middle East. However, concerns about lower demand and rising supply have caused prices to face their biggest weekly loss in over a month. This could impact consumers by potentially leading to lower gasoline prices in the short term, but it may also indicate broader economic challenges and shifts in global energy consumption patterns in the long term.
