Oil Prices Decline for Second Consecutive Week Amid Supply Concerns, US Gas Falls with Weak Winter Demand

Oil prices decreased on Friday, heading for a second consecutive weekly loss, as global oversupply concerns overshadowed geopolitical tensions. West Texas Intermediate (WTI) crude contracts dropped below $56 per barrel, while Brent crude fell below $60 per barrel after prices touched their lowest levels in nearly five years earlier this week.

The price pressure arises from expectations of increased supply, with the OPEC+ coalition beginning to restore previously halted production capacities, alongside rising output from non-OPEC+ producers. Initial signs of demand slowdown from major consumers, notably China and the United States, have kept oil prices down by about 20% since the beginning of the year.

Conversely, geopolitical tensions have limited the pace of decline, as the United States suspended all maritime activities related to oil tankers sanctioned over connections to Venezuela after seizing a blacklisted vessel last week. Washington is also moving to tighten sanctions on the Russian energy sector to support peace efforts in Ukraine, coupled with the UK imposing sanctions on three small Russian oil producers.

In terms of natural gas, US gas contracts fell by about 3% to around $3.9 per million British thermal units, nearing a seven-week low, with forecasts of warmer-than-normal weather across most of the US before Christmas reducing heating demand.

Prices remain under pressure from record production and ample inventories, with production in the lower 48 states estimated at about 109.7 billion cubic feet per day in December, close to record levels set in November. Data from the US Energy Information Administration (EIA) indicated a withdrawal of 167 billion cubic feet from inventories during the week ending December 12, slightly below expectations, with inventories remaining about 0.9% above the five-year average.

Meanwhile, flows of gas to US liquefied natural gas export facilities reached a strong average of 18.6 billion cubic feet per day, exceeding the previous record set in November, reflecting continued strength in external demand despite weak domestic consumption.