Oil prices declined on Friday after sliding more than 1 percent in the previous session, as the market’s war-related risk premium eased following Israel and Hamas’ agreement on the initial phase of a Gaza ceasefire plan.
Brent crude futures inched down 12 cents, or 0.18 percent, to $65.10 a barrel by 4:08 GMT, while U.S. West Texas Intermediate (WTI) crude dipped 7 cents, or 0.11 percent, to $61.44 per barrel.
Easing Mideast tensions weigh on oil prices
Israel and the Palestinian militant group Hamas reached a ceasefire agreement on Thursday, marking the first phase of U.S. President Donald Trump’s plan to end the Gaza war. Under the deal, ratified by Israel’s government on Friday, attacks will halt, Israel will begin a partial withdrawal from Gaza, and Hamas will release all remaining hostages taken during the initial attack that triggered the war, in exchange for hundreds of Palestinian prisoners held by Israel.
Oil prices had earlier climbed to a one-week high on Wednesday, rising about 1 percent, as stalled negotiations over a Ukraine peace deal fueled concerns that sanctions on Russia, the world’s second-largest oil exporter, might persist.
Despite the recent pullback, both benchmarks remained up roughly 1.2 percent for the week, recovering some ground after last week’s sharp decline.
Market focus shifts to oversupply fears
The Gaza ceasefire marked a significant step toward ending the two-year war that had heightened concerns over potential oil supply disruptions. With geopolitical risks easing, market attention has shifted back to the looming oil surplus as OPEC+ moves ahead with plans to unwind its production cuts.
A smaller-than-anticipated output increase for November, agreed upon by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday, helped ease some fears of oversupply and kept oil prices up this week.
OPEC+ announced a production adjustment plan to increase oil output by 137,000 barrels per day (bpd) starting in November 2025. This decision comes as part of OPEC+‘s ongoing strategy to balance global oil markets amid steady economic outlooks and healthy market fundamentals, including low oil inventories.
However, investors remain concerned that an extended U.S. government shutdown could weigh on the economy and curb oil demand.
Read: Silver prices surge to record highs above $50, riding gold’s rally driven by investor demand
Risks of rising global crude inventories in focus
Meanwhile, the U.S. Energy Information Administration (EIA) and other forecasters highlighted the risk of rising global crude inventories this week as production growth outpaces demand recovery. The EIA expects oil inventories to increase significantly through next year, exerting downward pressure on oil prices beyond the short term.
Softening demand, driven by slower economic growth, seasonal factors, or improved energy efficiency, could add to the decline in oil prices. Several analysts have warned that if the ceasefire remains in place and supply continues to exceed demand, oil prices could fall significantly below current levels.
Meanwhile, total weekly U.S. petroleum products supplied — a key indicator of domestic oil consumption — climbed to 21.99 million barrels per day last week, the highest level since December 2022, according to data from the Energy Information Administration (EIA) released on Wednesday.