Oil backs off seven-week high amid cautious outlook

Oil prices fell on Thursday, giving up the gains made in the previous session when they reached a seven-week high. The decline came as some investors booked profits following a drop in US equities, amid expectations of weaker winter demand and the resumption of Kurdish supplies.

Brent futures fell by 49 cents, or 0.7%, to $68.82 a barrel by 08:25 GMT, while US West Texas Intermediate (WTI) crude slipped 54 cents, or 0.8%, to $64.45.

Both benchmarks had climbed 2.5% on Wednesday to hit their highest levels since August 1, supported by a surprise weekly drawdown in US crude inventories and concerns that Ukrainian attacks on Russian energy infrastructure could disrupt supplies.

Giovanni Staunovo, commodity analyst at UBS, said: “We are seeing a market generally shifting toward risk aversion,” adding that two consecutive days of losses in US equities were weighing on oil prices.

Expectations of additional supply also pressured the market, with more flows anticipated soon from Iraq and Kurdistan. Priyanka Sachdeva, senior analyst at Phillip Nova, noted: “The return of Kurdish supplies revives fears of an oversupply scenario, pushing prices lower after nearing a seven-week high.”

Oil flows from Iraq’s Kurdistan region are expected to resume within days, after eight oil companies reached an agreement on Wednesday with the federal government and the Kurdish regional government to restart exports.

While concerns about Russian supply disruptions persist, Haitong Securities said in a report that another factor behind oil’s recent resilience was the absence of strong pressure from supply-demand fundamentals. The report added that with peak demand season gradually ending, prices have yet to reflect expectations of rising oversupply pressures.

Highlighting investor caution on demand, JPMorgan analysts said on Wednesday that US air passenger data for September showed only a marginal 0.2% year-on-year increase, compared with 1% growth in each of the two prior months.

They added: “Similarly, gasoline demand in the US has begun to decline, reflecting a broader trend of slowing travel patterns.”