Oil posts biggest weekly drop since July amid supply concerns

New York, Oil fell to a two-week low as the International Energy Agency warned of a looming supply glut.

Futures in New York ended the week 3 per cent lower after four straight days of declines. Sentiment continues to be dominated by an International Energy Agency report highlighting the challenge facing Opec and its allies in balancing the market as production surges from their competitors. US crude production is set to grow 1.3 million barrels a day next year at current prices, IEA’s executive director Fatih Birol said at an event in Washington DC Friday.

West Texas Intermediate crude for October delivery declined 24 cents, or 0.4 per cent, to settle at $54.85 a barrel on the New York Mercantile Exchange.

Brent for November fell 16 cents to $60.22 a barrel on the ICE Futures Europe Exchange, and traded at a $5.42 premium to WTI for the same month. The contract declined 2 per cent for the week.

Also fuelling oversupply concerns, US President Donald Trump was said to weigh easing sanctions on Iran, a move that RBC Capital Markets estimated could bring back around 700,000 barrels a day to the market. Meanwhile, the US and China showed signs of rapprochement in their trade war and Saudi Arabia’s new energy minister downplayed oil-demand concerns, leaving any talk of deeper output cuts to OPEC’s next ministerial meeting in December.

“Lacklustre investor positioning, potential thawing of the trade war and concerns of an Iran deal have clouded both investor appetite as well as the fundamental market outlook,” said Michael Tran, a commodity strategist at RBC Capital Markets. “Oil prices are caught in a cycle of trendless volatility.”