Oil prices experienced a decline during early European trading on Friday, driven predominantly by worries of oversupply, which have overshadowed geopolitical tensions that typically influence supply disruption fears. Brent crude futures fell by 0.6% to $65.95 per barrel, while West Texas Intermediate futures saw a 0.7% drop, settling at $61.94 per barrel.
Derren Nathan, head of equity research at Hargreaves Lansdown, highlighted a surprising inventory build in the United States, which increased by 3.9 million barrels last week, contributing to growing concerns about oversupply. This comes at a time when OPEC+ members and other nations are planning to elevate production levels. The International Energy Association has projected a global oil supply increase of 2.7 million barrels per day (bpd) this year—over four times the anticipated growth in demand. An additional boost of 2.1 million bpd is forecasted for next year.
Adding to the oil market’s anxieties, recent data released on Thursday indicated potential weaknesses in the U.S. economy, which could adversely affect oil demand. Weekly jobless claims surged to 263,000, significantly exceeding the expected 235,000 and marking the highest figure in nearly four years. Simultaneously, the consumer price index (CPI) report illustrated persistent inflation, with the annual rate rising to 2.9% in August, up from 2.7% in July. Month-over-month prices increased by 0.4%, contrasting with July’s 0.2% rise and surpassing economists’ predictions of a 0.3% monthly gain.
In currency movements, the British pound held steady against the dollar, trading at $1.3562 despite recent data indicating that the UK’s economic growth stagnated in July. The Office for National Statistics reported no growth in gross domestic product (GDP) for the month, aligning with market expectations after a 0.4% increase in June.
George Lagarias, chief economist at Forvis Mazars, commented on the UK’s economic landscape, noting that while the services sector is resilient, the overall economy requires more robust performance beyond just that sector. He mentioned that the central bank faces constraints amid ongoing inflation pressures and can do little to stimulate growth until next year. Progress may rely on government fiscal policy changes or a shift in international trade dynamics.
In currency trading, the pound depreciated by 0.2% against the euro, priced at €1.1548.
On a different note, gold prices ticked upward on Friday as investors sought refuge in the safe-haven asset amid uncertainties regarding the U.S. economy. Gold futures increased by 0.4%, reaching $3,687.80 per ounce, while spot gold rose by 0.5%, trading at $3,651.23 per ounce. Historically, investors turn to gold during periods of uncertainty, viewing it as a stable store of value. Earlier in the week, gold futures reached a new high, surpassing the $3,700 mark, although they have since retraced slightly.
In the broader market context, the FTSE 100 index climbed by 0.4% during Friday morning trading, standing at 9,338 points.
