OIL prices fell by more than 1 per cent on Friday (Dec 6) and cemented weekly losses as analysts projected a supply surplus next year on weak demand despite an Organization of the Petroleum Exporting Countries and its allies, a group known as Opec+, decision to delay output hikes and extend deep production cuts to the end of 2026.
Brent crude futures settled at US$71.12 a barrel, shedding 97 US cents, or 1.4 per cent. US West Texas Intermediate (WTI) crude futures settled at US$67.20 a barrel, falling US$1.10, or 1.6 per cent.
For the week, Brent prices lost more than 2.5 per cent, while WTI saw a drop of 1.2 per cent.
A rising number of oil and gas rigs deployed in the United States this week, pointing to rising production from the world’s biggest crude producer, also pushed prices lower.
On Thursday, Opec+ pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.
Weak global oil demand and the prospect of Opec+ ramping up production as soon as prices rise have weighed on trading, said Bob Yawger, director of energy futures at Mizuho in New York.
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“They are just waiting for better pricing and once they get that, they are going to start jumping in again,” Yawger said.
Opec+, which is responsible for about half of the world’s oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand – especially from top crude importer China – and rising output elsewhere have forced it to postpone the plan several times.
“While Opec+’s decision to hold off strengthens fundamentals in the near term, it could be seen as an implicit admission that demand is sluggish,” analysts at HSBC Global Research said.
Bank of America forecast that increasing oil surpluses will drive the price of Brent to an average US$65 a barrel in 2025, while oil demand growth will rebound to one million barrels per day (bpd) next year, the bank said on Friday.
HSBC, meanwhile, now expects a smaller oil market surplus of 0.2 million bpd, from 0.5 million bpd previously, it said.
Brent has largely stayed in a tight range of US$70 to US$75 per barrel in the past month, as investors weighed weak demand signals in China and heightened geopolitical risk in the Middle East.
“The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic,” PVM analyst Tamas Varga said.
Also pressuring prices was the US rig count, which grew for the first time in eight weeks, energy services firm Baker Hughes said on Friday in its closely followed report.
Baker Hughes said oil rigs rose five to 482 this week, their highest level since mid-October, while gas rigs rose by two to 102, the highest since early November.
Despite this week’s rig increase, Baker Hughes said the total count was still down 37, or 6 per cent below this time last year.
A mixed US jobs report, which showed a strong rebound in hiring but also a slight rise in the unemployment rate, extended oil’s losses. REUTERS
