Oil Notches Second Weekly Loss Amid Sanctions, Looming Surplus

Core Insights - Oil prices experienced a slight increase but recorded a second consecutive weekly loss due to concerns over potential oversupply and the impact of sanctions on Russian output [1][5] Group 1: Market Dynamics - West Texas Intermediate futures rose approximately 0.5% to settle below $60 per barrel, yet still faced a weekly decline [1] - The market is currently experiencing volatility influenced by fluctuations in equity markets [1] - The US government's restrictions on Russian crude purchases have led to Gunvor Group retracting its offer for Lukoil PJSC's international assets, leaving the future of these assets uncertain [2] Group 2: Supply and Demand Factors - Hungary received an exemption from US sanctions on Russian energy, alleviating fears of a supply shortage as the country imports over 90% of its crude from Russia [3] - Senior industry figures noted that recent US sanctions on Russia's largest oil companies are starting to affect the market, particularly in the diesel sector, where prices have surged [4] - The oversupply situation is further emphasized by the narrowing spread between the nearest West Texas Intermediate futures, which closed at its weakest level since February [5] Group 3: Future Outlook - There is a potential shift to a contango market, which could attract more bearish funds into crude trading, as longer-dated contracts may trade at a premium to nearer-term ones [6] - Despite the price drop, US crude oil production remains robust, surprising many traders [6] - The International Energy Agency anticipates a record oversupply of oil by the end of this year and into 2026, with increasing volumes already visible on tankers, although key storage hubs have not yet felt the impact [6]