Oil slid to multi-month lows as oversupply fears overshadow geopolitical uncertainties

Oil prices ended the week lower on Friday, sliding to multi-month lows as persistent concerns over global oversupply and subdued risk appetite outweighed fresh geopolitical developments. Both benchmarks recorded weekly declines of more than 4%, with bearish positioning and thin year-end liquidity amplifying the downward move.

Brent crude settled at $61.12 a barrel, down 16 cents or 0.26% on the day, while WTI closed 16 cents lower at $57.44 a barrel, its weakest settlement since May.

Market sentiment remained under pressure after the International Energy Agency reiterated expectations of a sizeable supply surplus next year, forecasting global output to exceed demand by 3.84 million bpd. The agency also noted that global oil inventories have risen to a four-year high, reinforcing perceptions of ample supply despite ongoing geopolitical risks.

Losses were compounded by weakness in US equities and declines across the refined products complex, with diesel futures falling about 1.4%. Trading remained choppy as market participants stayed cautious ahead of the Christmas and New Year holidays, following a challenging year for commodity performance.

Geopolitical headlines offered limited support. The US seizure of a sanctioned oil tanker off Venezuela and the imposition of additional sanctions on vessels linked to Caracas were largely dismissed by traders, who cited sufficient alternative supply. At the same time, uncertainty over potential Russia–Ukraine peace talks continued to weigh on prices, as any easing of sanctions could allow more Russian crude to re-enter global markets.

Some support persisted from ongoing disruptions, including Ukrainian drone strikes on Russian energy infrastructure. However, Russian seaborne oil product exports fell only marginally in November, suggesting limited near-term impact on physical supply flows.

Written by: Aiman Haikal