Oil Prices Drop Again Amid Sanctions and Supply Concerns

Oil prices experienced a second consecutive weekly loss, despite a slight increase on Friday, as market participants grappled with the impact of sanctions on Russia and the prospect of an oversupply. West Texas Intermediate (WTI) futures climbed approximately 0.5% to settle below $60 per barrel, but the overall trend for the week remained negative.

Concerns about a surplus in the oil market were compounded by fluctuations in equity markets. The recent decision by the White House to restrict purchases of Russian crude led oil trading giant Gunvor Group to retract its offer for international assets belonging to Lukoil PJSC. These assets include significant stakes in oil fields, refineries, and gas stations, leaving their future uncertain.

Market Reactions to Sanctions and Supply Dynamics

Potential exemptions from sanctions have emerged as a point of discussion. President Donald Trump indicated a willingness to exempt Hungary from restrictions on Russian energy purchases during a meeting with Prime Minister Viktor Orban. This announcement briefly pushed oil futures to intraday lows, easing fears of shortages, particularly since Hungary relies on Moscow for over 90% of its crude imports.

Senior industry figures have noted that recent U.S. sanctions on Russia’s two largest oil companies are beginning to impact the market, especially in the diesel sector, where prices have surged. Notably, the time spreads for diesel fuel indicate increasing supply pressure. Simultaneously, the U.S. sanctions coincide with an oversupply environment, putting downward pressure on key crude oil metrics. The spread between the nearest WTI futures contracts recently closed at its weakest level since February.

Dennis Kissler, senior vice president for trading at BOK Financial, commented, “If the market flips to contango, we may see more bearish funds enter the crude space.” This situation refers to the possibility of longer-dated contracts trading at a premium over nearer-term contracts. Market observers express surprise at the resilience of U.S. crude oil production, which has remained strong despite recent price declines.

Future Outlook and Supply Predictions

Looking forward, both OPEC and non-OPEC countries are expected to increase oil supplies significantly toward the end of this year and into 2026. The International Energy Agency (IEA) has predicted a record oversupply in the oil market. Although rising oil volumes are starting to appear on tankers, key storage facilities have yet to show signs of strain. U.S. oil inventories at the end of October were lower than at the beginning of the month, indicating a complex supply situation.

On a global scale, China—the world’s second-largest crude consumer—reported an increase in oil imports for October compared to the previous year. However, analysts anticipate a slowdown in the country’s pace of stockpiling, which could diminish support for oil prices.

As traders prepare for the upcoming week, they are keenly awaiting a series of reports from the IEA and OPEC that will offer deeper insights into the evolving supply-demand balance as the year draws to a close. The interplay of these factors will be crucial for understanding potential shifts in the oil market landscape.