Oil prices fell on Thursday (September 11), pressured by concerns over weakening US demand and a widespread oversupply, offsetting the threat to production from conflicts in the Middle East and Russia's war in Ukraine.

Brent crude futures fell 86 cents, or 1.3%, to $66.63 per barrel at 12:40 GMT, while US West Texas Intermediate crude fell 89 cents, or 1.4%, to $62.78. "Oil prices fell today in response to the IEA's bearish headlines, which point to a massive oversupply in the oil market next year," said Commerzbank analyst Carsten Fritsch.

The International Energy Agency (IEA) said in its monthly report that global oil supply will rise faster than expected this year as OPEC+ continues to increase production. However, the OPEC report, published after the IEA, maintained its non-OPEC supply and demand projections for this year, citing stable demand. The Organization of the Petroleum Exporting Countries and its allies, a group collectively known as OPEC+, decided on Sunday to increase production starting in October. The market is torn between a perceived supply shortage due to rising tensions in the Middle East and Ukraine and an actual supply glut due to increased OPEC+ production and swelling inventories, said PVM Oil Associates analyst Tamas Varga.

Saudi Arabia's crude oil exports to China are expected to surge in October, several trading sources told Reuters on Thursday, with Aramco shipping about 1.65 million barrels per day in October, compared with the 1.43 million barrels per day allocated in September. In the US, crude inventories rose by 3.9 million barrels in the week to September 5, the Energy Information Administration said, contrary to expectations for a 1 million barrel decline.

The market is also questioning how long China can continue to absorb barrels and keep OECD inventories low, said UBS analyst Giovanni Staunovo, adding that investors are also watching for further sanctions affecting Russian oil. US Energy Secretary Chris Wright and European Union Energy Commissioner Dan Jorgensen discussed efforts to restrict Russian energy trade in Brussels.

Jorgensen said the bloc's planned deadline is ambitious, but the process needs to be accelerated. By 2026, the overall oil market may record a large surplus, said Ole Hvalbye of SEB Research, adding that demand appears to remain strong and could potentially absorb the OPEC+ production increase. (alg)

Source: Reuters