Crude oil prices fall to $67.42 on weak U.S. demand, oversupply risks

Oil prices declined on Thursday, easing from the previous session as sluggish U.S. demand and persistent oversupply concerns outweighed geopolitical risks tied to Middle East tensions and Russia’s war in Ukraine.

By 4:01 GMT, Brent crude futures fell 7 cents, or 0.10 percent, to $67.42 a barrel, while U.S. West Texas Intermediate (WTI) crude futures dipped 9 cents, or 0.14 percent, to $63.58.

Oil gains over $1 on geopolitical tensions

Rising fears of supply disruptions in Russia and the Middle East helped support oil prices this week amid escalating military activity in both regions. The benchmarks had advanced by more than $1 each on Wednesday, following Israel’s strike on Hamas leadership in Qatar a day earlier, and as Poland activated its own and NATO air defenses to intercept suspected Russian drones that entered its airspace during an assault on western Ukraine.

Poland shot down Russian drones that had entered its airspace during strikes on western Ukraine, marking the first time NATO forces have fired during the conflict between Moscow and Kyiv. The incident initially fueled concerns of a broader escalation, particularly if additional NATO members were drawn in. However, Moscow described the incursion as unintentional and expressed willingness to hold talks with Poland.

In the Middle East, Israel’s airstrike in Qatar came shortly after Hamas claimed responsibility for a Monday shooting that killed six people at a bus stop on the outskirts of Jerusalem.

However, neither the Middle East escalation nor the drone incident in Poland posed any immediate threat to oil supplies. Market focus instead shifted back to fundamentals, with growing oil inventories, easing producer prices, and signs of a weakening labor market pointing to a slowdown in the U.S. economy.

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U.S. crude stocks rise by 3.9 million barrels

U.S. crude stocks rose by 3.9 million barrels in the week ended September 5, the Energy Information Administration said, after analysts expected a decline of 1 million barrels. Gasoline stocks also rose, adding 1.5 million barrels, against expectations of a 200,000-barrel dip.

This week, oil prices also drew support from the prospect of tighter U.S. sanctions on Russian crude exports, with President Donald Trump reportedly pushing for additional trade tariffs on India and China, two of Moscow’s biggest buyers.

Prices have surged since Monday after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced plans to raise output by a significantly smaller margin in October, signaling tighter market conditions than traders had anticipated.

Analysts now anticipate the U.S. Federal Reserve will lower interest rates at its upcoming policy meeting. With labor market conditions showing signs of softening, the Federal Open Market Committee (FOMC) is widely expected to make a 25-basis-point cut. However, analysts noted that a rare triple dissent in favor of a larger 50-basis-point reduction could draw significant attention.

Meanwhile, the European Central Bank is expected to leave its interest rates unchanged on Thursday.