Oil prices fell slightly on Thursday amid concerns about weak US demand and general oversupply risks
Oil prices declined on concerns about weak US demand and oversupply, but concerns about attacks in the Middle East and Russia's war in Ukraine limited losses. Current tensions in the Middle East and Russia's war on Ukraine do not pose a supply risk for now.
Brent crude futures fell 11 cents, or 0.16%, to $67.38 a barrel by 06:18 GMT, while WTI Crude futures fell 13 cents, or 0.2%, to $63.54.
Benchmark contracts gained more than $1 on Wednesday after Israel launched an attack on Hamas leaders in Qatar a day earlier and Poland scrambled its own and NATO air defense systems to shoot down suspected Russian drones that entered its airspace during the offensive in western Ukraine.
Analysts said neither event posed a risk of a sudden disruption to oil supply and that the market's attention was focused on supply-demand balances. Rising oil inventories, falling producer prices, and a slowing labor market all pointed to a softening in the US economy.
Oil remained under pressure from profit-taking and a surge in US inventories following a three-day rally, while concerns about oversupply have increased following the end of the US summer driving season.
Furthermore, investors are taking a more cautious stance ahead of the upcoming US inflation report. Expectations for more significant Fed rate cuts have already been factored in, and these expectations could be thwarted by a warmer-than-expected CPI report.
The Energy Information Administration (EIA) reported that US crude oil inventories increased by 3.9 million barrels in the week to September 5, compared to expectations of a 1 million barrel decrease. Gasoline inventories also increased by 1.5 million barrels, compared to expectations of a 200,000-barrel decrease.
The softer economy has meant that the U.S. Federal Reserve is expected to cut interest rates next week.
Meanwhile, the European Central Bank is set to change interest rates on Thursday.
On the supply side, OPEC+ decided on Sunday to increase production starting in October. While the increases are lower than in previous months and some expectations, this move exacerbates the weakness in the oil market. The EIA said this week that oil prices are likely to fall significantly in the coming months as increased production leads to large inventory buildups.
Despite low prices and sluggish oil demand growth, OPEC+ continues to increase production. This will likely push the market into oversupply by the end of 2025, creating an imbalance that will further depress crude oil prices.
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