Oil edged lower as oversupply fears overshadowed geopolitical risks

Oil prices eased at the start of the week, extending a cautious trend as mounting concerns over supply gluts continued to outweigh geopolitical risk premiums. Traders noted that despite ongoing conflicts and diplomatic tensions, the market remains more focused on fundamentals pointing to excess crude later this year.

Brent crude futures slipped 11 cents, or 0.2%, to settle at $66.57 a barrel. The global benchmark has been locked in a narrow range of $65.50 to $69 since early August. 

WTI’s October contract, which expired on Monday, ended down 4 cents at $62.64, while the more actively traded November contract fell 12 cents, or 0.2%, to $62.28.

Analysts said the muted moves underscore a market reluctant to break out of its current trading band. Forecasts for oversupply in the fourth quarter, driven by steady US output and a lack of appetite within OPEC for aggressive production cuts, have capped rallies. On the policy front, Washington’s hesitation to penalise countries still buying Russian crude has further dampened bullish sentiment.

So far, geopolitical flare-ups have done little to sway sentiment. While tensions in the Middle East and Eastern Europe remain elevated, they have not yet translated into meaningful supply disruptions. Instead, the market’s attention is firmly on balances, with expectations that inventories could climb in the coming months if demand slows into winter.

Crude has now traded within a $5 band for nearly two months, highlighting the cautious stance of investors balancing long-term supply risks against a still-fragile global demand outlook. Many expect prices to remain hemmed in until either OPEC shifts strategy or Western governments step up enforcement on Russian oil buyers.

Written: Farid Muzaffar