Oil’s Choppy Week Sends Prices Drifting Lower on Glut Concerns

A refinery in Martinez, California. Photographer: David Paul Morris/Bloomberg

(Bloomberg) -- The oil market on Friday looked like did it for much of the week: choppy.

Prices have been in a tug-of-war pattern for several days as traders take in conflicting signals on supply and weigh them against the outlook for the US economy. Repeated Ukrainian strikes on Russian energy assets along with global calls to place levies against Moscow’s crude have underpinned support. But so far, most experts still expect the market to move into a glut, with fears of oversupply reining in moves to the upside for weeks.

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West Texas Intermediate fell to trade near $63 a barrel as traders rolled over positions ahead of the October contract’s expiry next week, adding to choppy trading. Futures are poised to end this week little changed.

“Attacks on Russian oil infrastructure are giving some upside support to prices, but it’s still tempered by a market looking for a surplus in the months ahead,” said Edward Bell, acting group head of research and chief economist at Emirates NBD.

Adding to the focus on Moscow’s crude flows, traders have been following the developing relationship between the US and China and India. Speculators are looking for clues on whether the Asian nations will keep up their purchases of Russian oil.

Trump had a phone call with Chinese President Xi Jinping on Friday, and the US leader said the call was very good and topics discussed included trade, along with the Russia-Ukraine war and the approval of the TikTok deal. The meeting outcome reduced traders’ expectations of incoming US secondary tariffs against China.

The oil market is also digesting this week’s US central-bank decision to cut interest rates by 25 basis-points. Although lower rates typically boost energy demand, policymakers’ warnings of mounting weakness in the labor market weighed on sentiment. The dollar strengthened on Friday, making commodities priced in the currency less attractive.

Crude has traded in a $5 band for most of the past month-and-a-half, buffeted between geopolitical tensions and bearish fundamentals. The accelerated return of OPEC+ supply has boosted predictions of a looming glut later in the year, while growth-sapping tariffs imposed by US President Donald Trump threaten to destabilize the US economy.

“The balancing act of OPEC+ oversupplying the global market against a possible drop in Russian oil sales is keeping crude futures in very tight trade,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.

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--With assistance from Sarah Chen.

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