Oil prices gave up gains on Friday and posted a weekly loss of more than 4 per cent,on oversupply concerns,as the possibility of peace deal between Russia and Ukraine overshadowed increasing US military action in Venezuela.
Brent,the benchmark for two-thirds of the world's crude,settled 0.26 per cent lower at$61.12 a barrel.West Texas Intermediate,the gauge that tracks US crude,declined 0.28 per cent to$57.44 per barrel.
From last Friday's close,Brent and WTI slid 4.1 per cent and 4.4 per cent,respectively.Year-to-date,Brent has given up 18 per cent,while WTI has receded about 20 per cent.
Oil's early Friday gains came amid bargain-hunting and potential short-covering,after prices had hit eight-week lows,said Vandana Hari,chief executive of Singapore-based Vanda Insights.
"Though the oversupply narrative has reclaimed centre stage as the US-led Ukraine peace efforts grind on,this week’s sharp escalation in US-Venezuela tensions,which have also spilt over into the oil arena,is bolstering risk premium,"she said.
The US has boosted its forces in what Washington says is a campaign to curb illegal drugs.Venezuelan President Nicolas Maduro has accused the White House of attempting to use military pressure to overthrow him.
The situation came to a head this week when the US seized a tanker,called Skipper,off the coast of Venezuela after claims it was being used to smuggle Iranian oil.Caracas condemned the move as an act of piracy.Washington is reportedly planning to intercept more ships under similar suspicion.
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Venezuela has suggested the US is attempting to get hold of the South American nation's crude reserves,which are the world's largest,estimated at more than 300 billion barrels last year.Saudi Arabia is ranked second with 267 billion barrels.
"Heightened tensions between the US and Venezuela continue to keep traders mindful of possible supply interruptions,"said Vijay Valecha,chief investment officer of Dubai-based Century Financial.
On the other hand,talks between Russia and Ukraine to end their war have stalled,adding another layer to oil market uncertainty.
Any peace deal between Moscow and Kyiv would add more downward pressure to crude prices,although a breakthrough is unlikely given the political demands,analysts at National Bank of Kuwait said.
"Even if an agreement materialised and oil sanctions[on Russia]were lifted,supply gains may not be as strong as anticipated given that Russian oil supplies were already flowing fairly freely[to China and India especially]–albeit at heavily discounted prices under the price cap[from the US,EU and Group of Seven],"they said.
On Thursday,the International Energy Agency and Opec issued contrasting forecasts for oil supply in 2026.The Paris-based IEA said supply would surpass demand by about 3.84 million barrels per day,while the Vienna-based Opec predicted supply will match demand.
Oxford Economics,meanwhile,forecasts oil prices to continue declining in the next two years.Brent is pegged to end 2026 at$58 a barrel,easing to$55 in 2027,the UK research firm said.
Supply is expected to grow by 1.6 million barrels per day to about 106 million bpd next year,2.5 million bpd higher than its previous baseline,reflecting"stronger-than-expected US production despite lower prices and a faster ramp-up of new Brazilian projects",Oxford oil and gas forecasting head Bridget Payne said.
Last month,the Opec+group of producers agreed to keep oil production levels unchanged and approved a mechanism to determine members'maximum output capacity.
