Oil Prices Drop to Two-Month Lows Amid Concerns of Oversupply

SadaNews - Oil prices have remained near their lowest level in two months, after the International Energy Agency stated that the market is heading toward a record oversupply next year.

Brent crude was trading around $66 a barrel, after closing on Wednesday at its lowest level since June 5, while West Texas Intermediate crude stabilized around $63.

The agency's monthly report showed that global inventories will accumulate at a faster pace than the average increase recorded during the COVID-19 pandemic year in 2020.

Meanwhile, traders are monitoring the preparations for Friday’s summit between U.S. President Donald Trump and Russian President Vladimir Putin, which could result in either easing or tightening of U.S. sanctions on an OPEC+ member.

Donald Trump warned of "severe consequences" if Putin does not agree to a ceasefire, following a call with European leaders.

Price Decline Due to Increased Supply

Oil has lost more than 10% since the beginning of the year, as the OPEC+ alliance ended the voluntary cuts that began in 2023.

The U.S. government had reinforced its expectations earlier this week of an oversupply in 2026, while the International Energy Agency raised its production estimates from outside the Organization of the Petroleum Exporting Countries (OPEC) and its allies, particularly in the Americas.

U.S. government data showed that crude inventories in the country rose by about 3 million barrels last week to the highest level in two months, and distillate inventories and supplies in the key storage hub in Cushing, Oklahoma, also increased.

The spot price differential for Brent crude, which is the difference between the nearest two futures contracts, has narrowed, indicating that near-term market conditions have become less stringent. This widely monitored indicator reached 49 cents per barrel in a "backwardation" situation, down from about one dollar a month ago.