Oil prices slid 4 per cent on Friday, giving up gains for the week, as risk premiums fell after Israel and Hamas agreed on the first phase of a ceasefire in Gaza.
Brent, the benchmark for two thirds of the world's oil, settled 3.82 per cent lower to $62.73 a barrel. West Texas Intermediate, the gauge that tracks US crude, retreated 4.24 per cent to $58.90 per barrel.
Oil prices hit their weekly peak on Wednesday, but have so far lost more than 4 per cent after the Gaza agreement was announced on Thursday.
From last week's close - oil's biggest weekly decline in more than three months - Brent dropped 2.78 per cent, while WTI slid 3.25 per cent. For the year, Brent and WTI are down by about 16 per cent and 18 per cent, respectively.
Oil prices also brushed off Iran-related sanctions from the US. On Thursday, the US Treasury penalised a company with ties to Iran-backed militia groups in Iraq, with the president of Iraq's Olympic Committee also facing sanctions.
Crude traded flat to mildly weaker early on Friday, shrugging off the latest batch of US sanctions, with the Israel-Hamas deal "already baked in", analysts at Vanda Insights said.
But oil's further retreat reflected "a lower geopolitical risk premium as well as higher supply expectations", said Eirini Tsekeridou, a fixed income analyst at Swiss bank Julius Baer.
Oil prices have remained volatile this year with factors affecting their trajectory, including geopolitical tensions in the Middle East, the war between Ukraine and Russia and tariffs announced by US President Donald Trump that had a negative impact on oil prices.
Mr Trump is also increasing pressure on countries buying Russian oil.
On Sunday, Opec+ agreed to another output increase for November as it continued to unwind production cuts introduced two years ago. The group, which includes the UAE, Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman, decided to raise production by 137,000 barrels per day for next month, similar to the October increase.
Opec+ said the "steady global economic outlook and current healthy market fundamentals" were the reasons for the move.
It also reaffirmed the importance of "adopting a cautious approach and retaining full flexibility to pause or reverse the additional voluntary production adjustments, including the previously implemented voluntary adjustments of the 2.2 million barrels per day announced in November 2023".
This will be the eighth consecutive month that Opec+ is boosting production as it focuses on regaining market share and supporting the growth of its economies.
Opec+'s move stoked fears of an oversupply of oil in the market. However, those concerns are “exaggerated”, Vandana Hari, chief executive of Singapore-based Vanda Insights, told The National this month. The market is not “seeing the glut and it’s not evident yet in the physical market … it’s exaggerated”, she added.
Also, higher supply from Opec+, combined with a seasonal decline in US oil demand, could raise stockpiles in the US, the world's biggest consumer of crude.
