Oil rose as improved risk sentiment offsets surplus concerns

Crude prices edged higher on Monday, supported by improved risk appetite after progress toward ending the US government shutdown lifted broader financial markets. Gains were capped, however, by persistent concerns over a growing global supply surplus and softening Asian demand.

Brent rose 43 cents, or 0.7%, to settle at $64.06 a barrel while, WTI advanced 38 cents, or 0.6%, to close at $60.13 a barrel.

Underlying fundamentals continue to weigh on the market. Both Brent and WTI have fallen in five of the past six weeks as inventories built and major producers increased output. In Asia, floating storage has nearly doubled in recent weeks, reflecting redirected Russian barrels due to sanctions and softer demand from China and India. Analysts note that OPEC+ plans to slightly raise production in December, while US crude output remains near record levels.

Financial market optimism, led by a rally in US technology shares, bolstered sentiment and lifted refined fuels. US gasoline and diesel futures climbed around 1% following refinery outages in the Great Lakes and West Coast regions.

Geopolitical developments added limited support. Ukrainian drone strikes temporarily disrupted Russian refineries, including Lukoil’s Volgograd plant, while new US sanctions affected operations abroad. Lukoil also declared force majeure at Iraq’s West Qurna-2 field, prompting the government to transfer operations to state-owned companies.

Traders are now turning their attention to upcoming supply and demand reports from OPEC and the International Energy Agency. Analysts said the recent price recovery is largely sentiment-driven, with sustained gains likely to remain constrained unless consumption strengthens or supply tightens.

Written: Aiman Haikal