Oil posts second weekly gain despite Trump's call for lower crude prices

While oversupply and demand concerns linger, Ukraine's attacks on Russian energy assets are supporting prices

The slight weekly gain underpins the recent range-bound trading in oil futures. Reuters

Oil prices posted a second weekly gain but dropped on Friday, as calls by the US to reduce oil prices and put pressure on Moscow to end the Ukraine war outweighed increasing attacks on Russia’s energy infrastructure that threaten crude supplies.

Brent, the benchmark for two thirds of the world's oil, fell 1.1 per cent lower at $66.68 a barrel at the market close on Friday. West Texas Intermediate, which tracks US crude, finished down 1.4 per cent to $62.68 per barrel.

Brent has so far gained 1.26 per cent this week, while WTI has added 1.18 per cent. In the year so far, the benchmarks have retreated 8.94 per cent and 10.64 per cent, respectively.

The slight weekly gain underpins the range-bound trading in oil futures in recent weeks. Markets are caught between conflicting signals as traders consider rising geopolitical risks against the weakening demand and economic fundamentals.

A faster-than-expected reversal of the oil production caps by Opec+ – led by Saudi Arabia and Russia – also point to record surplus next year.

US President Donald Trump’s push for Russia to ends its war on Ukraine is also a serious factor for markets. Washington is demanding that its Nato allies stop buying Russian oil and impose stiffer sanctions.

“US President Donald Trump called again on US partners to stop buying oil from Russia, potentially widening out the use of secondary tariffs similar to what the US has imposed on India,” Edward Bell, acting group head of research and chief economist at Emirates NBD, said in a note to investors on Friday.

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A rise in Ukrainian attacks on Russia’s energy infrastructure, a move that could disrupt supplies of crude and petroleum products from the country, has also moved markets.

Last week, Ukraine struck the port of Primorsk, a key oil and fuel export terminal and the final station in the Baltic pipeline system. The attack led to brief suspension of oil loading operations at the port, which loads about one million barrels of crude a day.

On Thursday, Ukraine hit two Russian oil refineries. Russian refining runs have now dropped below five million bpd, the lowest since April 2022, according to an estimate from JPMorgan Chase.

“Expectations of a new tranche of Western sanctions on Russia, combined with Ukraine’s sustained drone strikes on Russian oil infrastructure, are putting a floor under prices,” said Vanda Insights, a global energy market consultancy. “At the same time, a broader narrative of an impending global oil surplus is capping the upside.”

Supply and demand dynamics

Spare capacity and supply shock in global markets are major concerns that traders have to contend with this year. This month, Opec+ decided to raise production for October by 137,000 bpd.

The move came after the group agreed in August to increase oil production by 547,000 bpd for September, following a larger-than-expected increase of 548,000 bpd rise in August and 411,000 bpd in May, June and July, accelerating the pace of its phased supply return.

The International Energy Agency in September also raised expectations of 2025 and 2026 global oversupply to 1.95 million bpd and 3.06 million bpd, respectively. Opec, however, held steady its 2025 as well as 2026 average demand growth estimates at 1.3 million bpd and 1.38 million bpd, respectively.

An increase in US distillate stockpiles by four million barrels, against market expectations of a gain of one million barrels, have also raised worries about demand in the world's top oil consumer and put pressure on prices, Reuters reported.

Economic data also added to concerns. Jobless claims data released this week indicated that the US labour market has softened, with both demand for and supply of workers falling, while single-family home building plunged to a near two-and-a-half-year low in August amid a glut of unsold new houses.

The US Federal Reserve on Wednesday also lowered its benchmark borrowing rates by a quarter percentage point, the first such move in a year. The Fed has indicated two more rate cuts that underpin the weakening US economy.