By Florence Tan
SINGAPORE (Reuters) – Oil prices edged up on Friday, supported by a surprise drop in U.S. oil inventories and simmering Middle East tensions, but prices were on track for their largest weekly decline in over a month due to concerns of reduced demand.
Crude futures climbed 16 cents, or 0.2%, to $74.61 a barrel by 0025 GMT while U.S. West Texas Intermediate crude was at $70.84 a barrel, up 17 cents, or 0.2%.
Both contracts saw gains on Thursday for the first time in five sessions following the Energy Information Administration (EIA) report showing decreases in U.S. crude oil, gasoline and distillate inventories last week.
However, U.S. crude production reached a record high of 13.5 million barrels per day last week, according to EIA data, raising concerns about increasing supply as Libyan output resumes and OPEC+ plans to further ease production cuts in 2025.
Brent and WTI are expected to decline by about 6% this week, marking their largest weekly drop since September 2, after OPEC and the International Energy Agency revised down their forecasts for global oil demand in 2024 and 2025, and as worries eased about a potential retaliatory strike by Israel on Iran that could disrupt Tehran’s oil exports.
“Speculative positioning in the ICE Brent complex strengthened from historically low levels, driven by heightened geopolitical risk of a possible Israeli attack on Iran’s oil facilities,” noted Citi analysts in a report.
“Although the market has been focused on reports of the U.S. advising Israel against targeting oil infrastructure, the risks remain elevated as tensions continue to escalate,” they added.
Citi projects that global oil demand will slow to 900,000 bpd in 2025 from 1 million bpd this year due to an economic slowdown and the increasing presence of electric vehicles on the roads.
“The potential impact of China’s upcoming economic stimulus plans on oil demand remains uncertain, and any significant support may only lead to a limited boost,” they further noted.