KEY POINTS
- Oil prices fell for a second straight week as expectations of a global supply glut dominated the market.
- Continued Venezuelan exports and optimism over a Russia-Ukraine peace deal eased geopolitical risk premiums.
- Analysts say sustained low prices could curb future supply growth, limiting the risk of a price freefall.
Oil prices slid again on Friday, leaving the market on course for a second consecutive weekly decline as expectations of rising supply from OPEC+ producers and the United States continued to weigh on sentiment. Hopes of progress towards a peace deal between Russia and Ukraine added to the easing of supply fears, offsetting lingering concerns over disruptions to Venezuelan exports.
Brent crude fell 17 cents, or 0.28 per cent, to $59.65 a barrel by mid morning in London, while US West Texas Intermediate dropped 31 cents, or 0.55 per cent, to $55.84. Both benchmarks were firmly lower on the week, with Brent down about 2.4 per cent and WTI off nearly 2.8 per cent.
The pullback underscores a market increasingly focused on the prospect of excess supply heading into next year. Analysts have warned that higher output from the OPEC+ alliance, alongside resilient production growth in the United States and other non-OPEC producers, could leave the global market awash with crude.
“That we are still trading at these levels tells you how much oil is available,” said Ole Hansen, head of commodity strategy at Saxo Bank. “There is enough supply in the system to absorb most shocks without prices reacting sharply.”
Supply fears eclipse Venezuela risks as traders look ahead to 2026
Geopolitical risk premiums also softened after uncertainty grew over how aggressively Washington would enforce US President Donald Trump’s pledge to block sanctioned tankers linked to Venezuela. The lack of clarity has tempered fears of an abrupt halt to Venezuelan exports, which account for roughly 1 per cent of global supply.
According to two people familiar with the country’s export operations, Venezuela authorised two cargoes not subject to sanctions to depart for China on Thursday, suggesting that shipments are continuing despite the tougher rhetoric from Washington.
Tony Sycamore, an analyst at IG, said doubts over enforcement and optimism surrounding a potential US-led peace initiative between Russia and Ukraine have reduced the urgency that previously supported prices. Together, those factors have eased concerns about sudden supply disruptions from two key producing regions.
Still, some analysts argue that the downside for oil may be limited. Bank of America said in a note that lower prices could eventually force higher-cost producers to rein in output, helping to stabilise the market and preventing a more pronounced slump.
For now, however, traders appear resigned to a softer near-term outlook, with abundant supply and improving diplomatic signals overshadowing the risks that have driven sharp rallies in the past.
