Key Pints
- Oil prices rose on Friday but were still on track for a second straight weekly loss.
- The market is caught between the threat of supply disruptions from sanctions on Russia and fears of a growing oversupply.
- U.S. sanctions are impacting the market, especially for diesel, and have led one trading giant to pull a major offer.
- The IEA is predicting a record oil oversupply at the end of this year and into 2026.
Oil prices rose on Friday, trimming a weekly loss as the market tried to balance the threat of supply disruptions from sanctions on Russia against the growing fear of an oversupply.
U.S. crude futures bounced back to trade near $60 a barrel, but were still on track to end the week lower. Adding to the concerns about a glut, oil prices have also been shaken by volatility in the stock markets this week.
The White House’s move to tighten restrictions on buying Russian crude has had an impact, causing the oil trading giant Gunvor Group to pull its offer for the international assets of Russian oil company Lukoil PJSC. What will happen to those assets, which include stakes in oil fields and refineries, is now uncertain.
Industry leaders have warned that the latest U.S. sanctions on Russia’s two largest oil companies are already affecting the market, especially diesel prices. Diesel prices have been surging, and the market is showing signs of supply pressure.
At the same time, these U.S. sanctions are occurring amid oversupply that has weighed on crude oil prices. Supplies from both OPEC+ and other countries are expected to increase significantly at the end of this year and into 2026.
The International Energy Agency (IEA) is even predicting a record oversupply. While more oil is appearing on tankers, key storage hubs aren’t yet seeing the impact. In the U.S., oil inventories were actually lower at the end of October than at the beginning of the month.
“The market continues to weigh a rising oil surplus against mixed macro,” said Ole Hvalbye, a commodities analyst at SEB AB. “On the technical side, Brent still looks like it’s in a normal correction within a broader uptrend.”
In China, the world’s second-largest crude consumer, imports rose in October compared with a year ago. However, the country is expected to slow its stockpiling, which could undermine oil prices. Next week, traders will be closely watching reports from the IEA and OPEC for more clues about the supply-demand balance as the year comes to a close.
