Oil Prices Decline Amid Concerns of Weak Demand and Expectations of Increased Supply

Oil prices experienced a sharp decline on Friday, September 12, affected by pressures from increased supply and weak demand in the United States, ignoring the geopolitical concerns that usually support prices.

By 07:03 GMT, Brent crude fell by 55 cents (0.83%) to $65.82 a barrel, while U.S. West Texas Intermediate crude dropped 57 cents (0.91%) to $61.80.

This drop reflects a continuation of a selling wave that began in the previous session, as fundamental factors in the oil market overshadowed concerns about supply disruptions due to conflicts in the Middle East and Ukraine.

In this context, the chief market analyst at "Philipp Nova" brokerage commented: "It does not seem that the inflationary pressures in the United States have ended, which weakens the outlook for oil demand from the world's largest economy."

She added: "Geopolitical disruptions are no longer sufficient to support prices, given signs of oversupply and weak demand."

This decline was driven by U.S. government reports released on Thursday, which showed consumer prices in August rising at the fastest pace in seven months, along with an increase in unemployment claims. This reinforced expectations that the Federal Reserve would cut interest rates next week to stimulate economic growth and support energy demand.

It is worth noting that prices had risen by as much as 2% earlier in the week due to concerns about production disruptions, but they returned to lose those gains on Thursday.

Meanwhile, the monthly report from the International Energy Agency predicted that global oil supply would increase at a faster pace than expected this year, driven by planned production increases from the "OPEC+" alliance led by Saudi Arabia and Russia.

For its part, the monthly "OPEC" report maintained its optimistic forecasts for global oil demand growth for 2025 and 2026, indicating continued positive momentum in the global economy.

This comes following the "OPEC+" alliance's decision on Sunday to increase production quotas starting in October, as Saudi Arabia seeks to enhance its market share.

According to trade sources, Saudi crude oil exports to China are expected to rise to 1.65 million barrels per day in October, compared to about 1.43 million barrels per day in September, according to refinery allocation data.

In contrast, Russia, the second-largest oil producer after the United States, recorded a decline in revenues from crude oil and petroleum product exports during August 2024 to one of its lowest levels since the outbreak of the war in Ukraine.

Data from the U.S. Energy Information Administration also showed that inventories rose last week by 3.9 million barrels to reach 424.6 million barrels, adding further pressure on prices.