Oil prices set for second straight weekly drop on signs of growing supply surplus

Oil prices experienced a second consecutive weekly decline on Friday, as market participants grappled with the prospect of a burgeoning global supply surplus and heightened tensions between the United States and Iran. Brent crude futures closed at $95.84 per barrel, while U.S. WTI crude settled at $88.56 per barrel, marking a 2.5% decrease for both during the week.Oil's trading week was marked by volatility, with initial hopes for improved relations between the U.S. and Iran tempered by ongoing attacks on Saudi Arabian infrastructure and tanker incidents in the Gulf.

The downward pressure on oil prices was also attributed to weakening U.S. demand, as mounting crude and fuel inventories signaled a sluggish consumption outlook. Last week, U.S. crude and fuel inventories expanded, propelled by subdued demand for refined products and a surge in oil imports.Additionally, Asian spot LNG prices edged lower but remained close to a four-year high, driven by persistent concerns over U.S.-Iran diplomacy and a scarcity of storage capacity in Europe.

The average LNG price for December deliveries into northeast Asia fell to $31.30 per million British thermal units, a decline from $31.40 per mmBtu in the previous week. Despite improving cargo flows through the Strait of Hormuz, with 16 shipments in November compared to 26 in October, tensions lingered in the region. In Europe, the Dutch TTF gas price increased by 3.0% to $28.74 per mmBtu, reflecting heightened competition for scarce supplies amidst forecasts of continued cold weather.

Analysts warned that this could spur withdrawals from storage, with levels projected to fall below 70% next week.