Oil futures fell for a second consecutive week, while traders assessed the International Energy Agency's outlook for a global supply surplus, continued disruptions to Middle Eastern oil shipments, and cooling expectations for a negotiated settlement between the U.S. and Iran.
Front-month Brent crude for January delivery settled at $95.84 a barrel on Friday, up two cents on the day and down 2.5% from a week ago. West Texas Intermediate for December delivery slipped 0.2% to $88.56 a barrel for a 2.5% weekly loss.
The International Energy Agency said Friday that the global oil market is expected to return to a surplus in the fourth quarter for the first time since the Iran war began, as a recovery in Middle Eastern exports outpaces demand.
Global oil supply rose by 2.3 million barrels a day to 105.4 million barrels a day in October, prompting the Paris-based agency to raise its fourth-quarter supply estimate by 3.3 million barrels a day. Gulf oil exports excluding Oman reached 18.4 million barrels a day, about 26% below prewar levels.
The agency also reported the first monthly increase in observed global oil inventories since June, with stocks rising by 52 million barrels in October. However, inventories remained 462 million barrels below their levels at the start of the war.
Oil futures rebounded Thursday after President Trump said Washington no longer needed an agreement with Iran, raising questions about the prospects for negotiations. Trump also said in a Truth Social post that the U.S. had secured control of the Strait of Hormuz.
"Oil prices have come off really quite significantly, even with the uptick of the last couple of days," said Ellen Fraser, a partner and energy analyst at consulting firm Baringa. But the decline has been sentiment-driven, which "in itself is a bit of a warning."
The northern hemisphere is heading for a tight winter with prices still well above pre-war levels, Fraser added. "There's still a lot of tension and stress in the market."
ING analysts said recovering Middle Eastern production had eased immediate supply concerns, although reliance on alternative export routes continued to leave shipments vulnerable to disruption. The pace at which traffic through the Strait of Hormuz returns to normal remains a key factor for oil prices, they said.
Oil markets may be pricing in the prospect of diplomatic progress before additional supplies become available, according to Terri-Leigh Bennett, chief operating officer at CMS Prime. Negotiations wouldn't immediately restore damaged infrastructure, normalize shipping routes or guarantee uninterrupted production, she said.
Security risks persisted across the region. The Bahrain-based Joint Maritime Information Center, a multinational maritime security monitoring body, said in an advisory distributed Thursday by U.K. Maritime Trade Operations that it had recorded 181 maritime security incidents since March 1, including four since its previous report published Sunday.
Oil shipments through the Strait of Hormuz also remained sharply below prewar levels, with confirmed transits averaging 4.06 million barrels a day in the latest weekly data available Wednesday, compared with 17.1 million barrels a day before the conflict, according to preliminary Kpler data.
The IEA expects global oil demand to fall by 2.7 million barrels a day this year before rebounding by 2 million barrels a day in 2027. It warned that further attacks on shipping could undermine the recovery in oil flows.
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