Oil prices inched higher on Friday after four consecutive sessions of losses, though they remained on course for their sharpest weekly drop since late June amid speculation that OPEC+ may boost production despite oversupply worries.
As of 4:01 GMT, Brent crude futures were up 35 cents or 0.55 percent to $64.46 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 34 cents or 0.56 percent to $60.82 per barrel.
If the market fails to stage a stronger rebound, Brent is poised to settle at its lowest closing level since the week ending May 30, while WTI could finish at its weakest since May 2. On a weekly basis, Brent has dropped 8.3 percent, while WTI was down 7.6 percent.
OPEC+ production hike to test oil’s annual lows
Oil prices plunged amid prospects that OPEC+ may approve a production hike of up to 500,000 barrels per day in November, three times the October increase, as Saudi Arabia pushes to regain market share.
“If OPEC+ do go ahead and announce a 500,000bpd increase this weekend, it’s likely a big enough increase to send crude oil lower again, initially to support at $58.00, before a test of this year’s lows $55.00 area,” said Tony Sycamore, an analyst at IG.
Analysts also warn that the prospect of increased OPEC+ output, combined with slowing global refinery runs from seasonal maintenance and weaker demand in the coming months, is likely to accelerate stockpile builds in the U.S. and beyond.
“After emphatically rejecting last week’s $66.42 high, crude oil has overnight broken and closed below the support coming from the bottom of its six-week range at $61.50/61.40ish,” Sycamore added.
U.S. crude inventories rise as government shutdown risks demand
Oil prices also continued their decline after data from the U.S. Energy Information Administration on Wednesday showed a rise in crude, gasoline and distillate inventories last week, reflecting softer refining activity and cooling demand. Crude inventories rose by 1.8 million barrels to 416.5 million for the week ending September 26.
Gasoline stocks rose by 4.1 million barrels in the week to 220.7 million barrels, the EIA said, compared with expectations for a 675,000-barrel build. Meanwhile, distillate stockpiles, which include diesel and heating oil, rose by 578,000 barrels in the week to 123.6 million barrels, compared to forecasts for a 1.1 million-barrel drop.
“Concerns that a U.S. government shutdown will curtail economic activity and the resumption of Iraq’s Kurish oil exports is also weighing on the crude price,” added Sycamore.
On Wednesday, the Trump administration froze $26 billion in funding for Democratic-leaning states, acting on its threat to leverage the government shutdown against Democratic priorities.
Finance ministers from the Group of Seven (G7) pledged on Wednesday to step up pressure on Russia by imposing measures against entities that continue to expand purchases of Russian oil, further adding to supply pressures and impacting oil prices.