Oil Heads for Second Weekly Loss as Supply Fears Meet Weak Demand

Prices stabilise, but the trend points lower

Oil heads for a second weekly loss as supply fears meet weak demand signals, despite a modest bounce at the end of the week. On Friday, benchmark Brent crude traded near the high $60s while U.S. West Texas Intermediate hovered around the mid $60s, recovering part of the prior three sessions of declines. The late support from a softer dollar and light bargain hunting was not enough to offset the underlying narrative of comfortable supplies, U.S. inventory builds and questions over demand growth in key consuming regions. For Tredu readers, the direction of travel matters more than the intraday uptick: the market is still logging another weekly loss driven by persistent supply jitters.

Oversupply worries back at the forefront

The core pressure point is renewed concern that the market is tilting into surplus. OPEC and its allies have already delivered sizeable output increases this year, and traders remain sceptical that planned pauses in additional hikes will be enough to prevent a mild glut. On top of that, non OPEC supply remains robust, with U.S. production holding near multi year highs and exports staying active. Analysts note that seaborne flows into the Atlantic Basin and Asia have risen in recent weeks, adding visible barrels just as refinery runs soften seasonally. The result is a market where participants increasingly price in comfortable availability rather than scarcity, which caps rallies and anchors expectations for a second weekly loss.

U.S. inventories send a cautionary signal

A larger than expected U.S. crude stock build during the week reinforced that message. Government data showed inventories rising by several million barrels, driven by higher imports and slower refinery demand, even as gasoline and distillate stocks declined. For traders, fresh proof of crude accumulating in storage is difficult to ignore when macro sentiment is mixed. Inventory builds at this stage of the year suggest that refinery maintenance, patchy product demand and cautious margins are combining to leave more crude unprocessed, another ingredient in the oil heads for second weekly loss story.

Demand concerns weigh on sentiment

On the demand side, signals are uneven. In the United States, worries about the impact of the prolonged government shutdown, pressure on travel activity and softer freight trends have crept into energy conversations. In Europe and parts of Asia, growth indicators point to only modest momentum. While there is no single dramatic collapse, the accumulation of softer readings has tempered the robust consumption assumptions that supported prices earlier in the year. A backdrop of fragile demand and rising supply is precisely the combination that keeps weekly losses in focus.

Market structure reflects cautious positioning

Time spreads and curve structure mirror the more comfortable balance. Brent and WTI have shifted away from the tight backwardation that typically signals immediate scarcity, leaning closer to a flatter curve that indicates adequate prompt barrels. Volatility remains contained, suggesting that while sentiment is negative, it is not panicked. Positioning data point to reduced speculative length as funds trim exposure rather than rush to add fresh shorts. This measured stance fits a market grinding lower on fundamentals, not collapsing on a single shock.

OPEC+ messaging and the risk of deeper cuts

The question now is whether OPEC+ is prepared to defend a floor more actively. Officials have signalled they will pause further output increases in the coming quarter and stand ready to adjust if prices slide too far. For now, the group appears comfortable watching how the second straight weekly decline unfolds before considering deeper intervention. Traders are alert to any sign that leading producers, particularly in the Gulf, might refine official selling prices or voluntary cuts to slow the slide if oversupply becomes more pronounced.

Geopolitics and sanctions in the background

Sanctions on Russian and Iranian flows, as well as intermittent disruptions from conflicts and infrastructure incidents, continue to shape trade patterns, but their bullish impact has been partly diluted by the broader surplus narrative. Some cargoes are rerouted or discounted rather than fully removed, keeping overall availability resilient. While these factors prevent a complete collapse in sentiment, they have not outweighed the effect of higher aggregate output and softening macro indicators.

What traders are watching into next week

Short term, attention will focus on three sets of signals. First, whether U.S. inventory data confirm a trend of repeated stock builds or revert toward draws as refineries return from maintenance. Second, any change in OPEC+ commentary that hints at stronger action to support prices if benchmarks stay near recent lows. Third, macro releases that could shift views on demand, including industrial production, freight, travel and consumer spending data. If these indicators continue to lean soft while supply stays elevated, oil heads for second weekly loss on supply jitters will read less like a headline and more like the baseline scenario.

Bottom line

Oil heads for a second weekly loss as supply fears meet weak demand, with oversupply concerns, U.S. inventory builds and cautious macro signals outweighing a modest late week bounce. Until either demand surprises on the upside or producers move decisively to tighten balances, the market is likely to trade defensively, with rallies viewed as opportunities to reduce risk rather than proof of a durable turning point.