Oil prices fell on Friday, extending the previous session’s sharp losses, as worries about weakening U.S. demand and a looming supply glut outweighed fears of disruption from conflicts in the Middle East and Ukraine.

Market Performance

By 04:19 GMT, Brent crude futures dropped 0.74% to $65.88 per barrel, while West Texas Intermediate (WTI) fell 0.82% to $61.86. Both benchmarks had gained as much as 2% earlier this week on geopolitical tensions but have since erased those advances.

Demand and Inflation Concerns

The sell-off followed Thursday’s data showing U.S. consumer prices rose at their fastest pace in seven months, alongside a spike in unemployment claims. The figures heightened expectations that the Federal Reserve will cut interest rates next week to stimulate growth and support energy demand.

However, analysts warned that inflation challenges still cloud the demand outlook for the world’s largest oil consumer, limiting crude’s upside.

Supply-Side Pressures

The International Energy Agency (IEA) said in its monthly report that world oil supply is rising faster than anticipated in 2025, driven by OPEC+ production increases. This reinforced concerns of oversupply even as geopolitical risks intensified.

OPEC itself left its robust demand growth forecasts for 2025–2026 unchanged, pointing to steady global economic growth. At the same time, the group confirmed it will raise quotas from October, led by Saudi Arabia’s efforts to regain market share. Exports to China are set to surge to 1.65 million barrels per day in October, up from 1.43 million bpd in September.

In Russia, oil revenues fell sharply in August, hitting one of the lowest levels since the Ukraine conflict began, according to the IEA.

U.S. Inventories Add to Pressure

The Energy Information Administration (EIA) reported U.S. crude stocks rose by 3.9 million barrels last week to 424.6 million barrels, far above expectations for a drawdown. Gasoline and distillate stocks also increased, reinforcing signs of cooling fuel demand following the summer travel season.

Outlook

The crude market remains caught between two opposing forces: supply-side pressure from OPEC+ output hikes and rising inventories, versus short-term risks of disruption from war and geopolitical instability. For now, fundamentals suggest oversupply is the dominant theme, limiting any rally despite escalating tensions.