Crude Oil Prices Edge Higher as Traders Weigh Record Surplus Outlook Against US Sanctions

Crude Oil prices edged slightly higher on Friday, recovering some ground after a sharp sell-off in the previous session. Traders balanced the prospect of a record global supply surplus next year against renewed risks from US sanctions on Russian energy firms.

Crude Prices Recover After Sharp Drop

West Texas Intermediate (WTI) rose 0.3%, settling just below $59 a barrel, following a 4.2% slump its previous day, its biggest single-day decline since June.

The modest recovery came after the International Energy Agency (IEA) warned that global oil supply is likely to exceed demand by over 4 million barrels per day in 2026, marking the sixth consecutive downward revision to its demand outlook.

Rising US Inventories Add to Supply Pressure

Hours after the IEA’s report, a US government data release showed that crude inventories rose by 6.4 million barrels last week, the largest weekly build since July. The increase far exceeded market expectations, further fuelling concerns of oversupply in the short term.

Meanwhile, OPEC reported that global oil supply had already exceeded demand in the third quarter, reversing its earlier projection of a shortfall for the same period. The organisation noted that rising production from member countries had contributed to the imbalance.

Market Structure Turns Bearish Amid Surplus Fears

The shift in sentiment has been reflected in the futures market, with WTI’s prompt spread, the price difference between near-term and longer-dated contracts, turning into contango, where near-term contracts trade at a discount to later ones.

This pricing pattern typically signals ample short-term supply and weak near-term demand. However, Thursday’s partial rebound showed some traders covering positions after the steep fall, with product inventories reportedly declining and exports picking up.

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Conclusion

Oil prices inched higher after a steep fall, as traders weighed the IEA’s projection of a record surplus against fresh US sanctions on Russian producers. The market remains under pressure from rising inventories and production growth, with key indicators pointing to an increasingly loose supply-demand balance heading into 2026.

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