Oil prices slumped on Friday but were on track for a second weekly gain as investors weighed stagnating demand against the Russian crude supply uncertainty amid intensifying war with Ukraine.
Brent, the benchmark for two thirds of the world’s oil, was down 0.68 per cent to 68.15 a barrel as of 11.55am UAE time. West Texas Intermediate, the gauge that tracks US crude, fell 0.65 per cent to $64.18 per barrel.
From last week’s close, Brent and WTI are pace to add 1.43 per cent and 0.75 per cent, respectively. However, both benchmarks are set to record a monthly loss amid broader demand concerns. Since the beginning of the year, Brent has retreated 8.7 per cent, while WTI has shed 10.5 per cent.
Crude rose on Wednesday after Russia and Ukraine traded attacks on each other’s energy infrastructure, resulting in damage to an oil refinery in Russia.
Prices further went up on Thursday after German Chancellor Friedrich Merz said Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy would not be meeting.
Talks with Russia to end its war with Ukraine have ramped up following Mr Putin’s summit with US President Donald Trump earlier this month. However, it ended without a clear resolution.
Adding to concerns is Washington’s dislike of India’s oil purchases from Russia, which reignites some supply concerns, said Norbert Rucker, head economics and next-generation research at Swiss bank Julius Baer.
“While geopolitics brings swings in the market mood, the fundamental trends remain shaped by rising supplies and stagnating demand,” he said.
Zurich-based Julius Baer expects the oil market heading towards a supply surplus later in 2025, with both the Western summer driving season and the Middle Eastern summer power burn season ebbing.
“That said, the market mood has cooled significantly – in expectation of this surplus, which increases the vulnerability to short-term price spikes ignited by geopolitics and supply concerns,” Mr Rucker added.
These developments have added to a volatile year for oil markets that have also featured Mr Trump’s tariff plans and the Iran-Israel conflict.
Demand concerns, a slowing global economy and less-than-stellar growth in China, the world’s largest crude importer, have dampened prices this year.
Oil is also under pressure as members of Opec alliance of crude producers, led by Saudi Arabia and Russia, continue to boost supply. This month, the group agreed to increase oil production by 547,000 bpd for September, following a 548,000 bpd rise in August and 411,000 bpd from May, June and July.
Earlier this month, Opec slightly increased its global oil demand forecast for 2026, expecting a tighter market amid economic momentum that is expected to continue next year.
Demand for crude is expected to grow by 100,000 barrels per day to 1.4 million bpd, with a slower expansion in supplies from Opec’s rivals.
The group also revised its 2025 economic growth forecast higher, to 3 per cent, expecting the “strong momentum” in the first half of 2026 to continue into the later part of the year. Growth estimate this year, however, remained unchanged at 3.1 per cent.
On the other hand, the International Energy Agency raised its forecast for oil supply growth this year following a decision by Opec to hike production and lowered its demand forecast due to lacklustre demand across the major economies.
The IEA expects world oil supply to rise by about 370,000 barrels a day to 2.5 million barrels a day in 2025 and by 620,000 bpd to 1.9 million bpd in 2026.
World oil demand will rise by 680,000 bpd this year, down from 700,000 bpd previously forecast, the Paris-based agency said.