Oil Edges Up as Glut Fears Ease Despite Weak Demand

(Reuters) – Oil prices regained a little ground on Thursday, buoyed by easing concerns over a potential supply glut as sanctions on Russian companies begin to bite.

Having closed the previous session at two-week lows, Brent crude futures gained 35 cents, or 0.6%, to $63.87 a barrel by 1120 GMT while U.S. West Texas Intermediate futures rose 39 cents, or 0.7%, to $59.99.

The latest sanctions on Russia’s biggest oil companies two weeks ago are sparking some concerns about supply disruptions, despite rising output from OPEC and its allies, analysts said.

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Lukoil’s operations at its foreign businesses are struggling in the face of the sanctions, Reuters reported this week.

“There is a little bit of an impact on prices (from the sanctions), but not a huge one,” said Jorge Montepeque at Onyx Capital Group. “Based on the numbers, it should be bigger, but the market still needs to be convinced there will be impact.”

Global oil prices fell for a third straight month in October on fears of oversupply as OPEC and its allies increase output while production from non-OPEC producers is also still growing.

The wider OPEC+ group’s plan to pause further production increases in the first quarter of next year served to ease worries about oversupply, Haitong Securities said.

Demand weakness, however, remains in focus. In the year to November 4, global oil demand has risen by 850,000 barrels per day, below the 900,000 bpd projected previously by J.P. Morgan, the bank said in a client note.

“High-frequency indicators suggest that U.S. oil consumption remains subdued,” the note said, pointing to weak travel activity and lower container shipments.

In the previous session, oil prices fell after the U.S. Energy Information Administration said that U.S. crude stocks rose by 5.2 million barrels to 421.2 million barrels last week.

“We think that downward pressure on oil prices will prevail, supporting our below-consensus forecast of $60 per barrel by end-2025 and $50 per barrel by end-2026,” Capital Economics said in a note.

Saudi Arabia, the world’s top oil exporter, sharply reduced the prices of its crude for Asian buyers in December, responding to a well-supplied market as OPEC+ producers boost output.