Oil prices maintained their steepest decline in a week, as markets weighed tentative hopes for reduced Middle East tensions and the evolving global supply landscape. Brent crude hovered around $65 a barrel after shedding 1.6% on Thursday, while US benchmark West Texas Intermediate slid below $62.
The downtrend followed news that Israel has given the green light to a proposal under which Hamas would free hostages in return for the release of prisoners—a significant move towards an agreement that could bring an end to the protracted Gaza conflict.
The ongoing violence has roiled Middle Eastern markets and inflated a war premium in oil prices. Steps toward a tentative peace agreement could further unwind that risk premium, particularly as oil supply looks set to outstrip demand heading into the end of the year.
Adding further pressure, OPEC+ announced last Sunday a renewed increase in production quotas, as the alliance continues its push to regain market share. Still, they agreed for only a 137,000-barrel per day boost for November, which came in below some of the higher figures speculated ahead of the talks, sparking a short-lived rally at the start of the week.
Excess supply in the oil market is primarily driven by increased outputs from the group’s members and other key producers in the Americas, including the United States. While overall sentiment on crude remains bearish, Citigroup Inc. notes that market participants are split on just how negative the outlook should be, citing feedback from its clients.
ANZ Group Holdings’ analysts, Daniel Hynes and Soni Kumari, wrote that the OPEC+ output hike is unlikely, by itself, to trigger a further price drop. They also emphasized that supply-driven surpluses are rarely unforeseen, and the market tends to price in such developments ahead of time.
Separately, the United States this week imposed sanctions on over 50 entities and individuals linked to Iran’s energy sector—including a strategic oil terminal and a Chinese independent refinery—marking the latest in a series of punitive measures this year targeting firms in Asia.
