Oil loses more than 2% for the second consecutive week under pressure from supply and demand

Oil prices rose marginally in trading on Friday, November 7, ending the week in the green zone, but the weekly picture was bleaker as crude recorded losses exceeding 2% for the second consecutive time. The market continues to balance between a complex scene dominated by fears of a surplus in global oil supply amid a slowdown in U.S. demand.

U.S. crude futures rose by 32 cents to settle at $59.75 per barrel, while Brent crude contracts increased by 25 cents to settle at $63.63 per barrel.

This pressure is attributed to increased supplies from major global producers and an unexpected rise in U.S. inventories. Ole Hvalby, an analyst at SEB Bank, stated: "The market is still balancing between a growing surplus in oil supply and mixed macroeconomic indicators."

The significant increase in U.S. inventories, which reached 5.2 million barrels, reignited fears of a supply surplus. Tony Sycamore, a market analyst at IG Markets, noted that "the unexpected increase in U.S. inventories by 5.2 million barrels this week has reignited concerns about a supply glut," adding that "this was exacerbated by risk-averse flows that supported the dollar and by the ongoing U.S. government shutdown, which raises uncertainty about economic activity."

Fears of the implications of the longest government shutdown in U.S. history pressured prices, as it led to reduced flights and raised doubts about the health of the economy. Data from the Energy Information Administration showed that crude inventories rose more than expected due to increased imports and a decline in refining activity.

On the oil policy front, the OPEC+ alliance decided on a slight increase in production during December while postponing any additional increases in anticipation of a surplus, while the abundance of Saudi supplies led to a sharp reduction in official selling prices for its customers in Asia.

On a positive note, European and U.S. sanctions on Russia and Iran provided support to the markets by disrupting supplies to major importers such as China and India. Customs data also showed that China's crude imports in October rose by 2.3% from December and by 8.2% year-on-year to reach 48.36 million tons, supported by increased refinery operating rates in the world's largest oil importer.