(Bloomberg) — Oil headed for its deepest annual loss since the pandemic in 2020, with prices undermined by concerns about a punishing surplus that’s set to dominate market sentiment and trading into the new year.
US benchmark West Texas Intermediate was below $58 a barrel, on track for a fifth monthly loss and down by almost 20% this year. Brent for March closed above $61. Traders’ near-term focus was on an upcoming OPEC meeting, a bearish US industry report, and a slew of geopolitical tensions.
Crude has slumped this year as supplies swelled from OPEC and its rivals, while world demand growth slowed. Top forecasters including the International Energy Agency are predicting a huge glut next year, and even OPEC’s secretariat — usually more bullish than others — projects a modest surplus.
OPEC members — scheduled to meet by video conference on Jan. 4. — are expected to stick with a plan to pause further supply hikes amid growing evidence of the surplus, according to three delegates.
Ahead of that, the industry-backed American Petroleum Institute reported crude inventories increased 1.7 million barrels last week. That would be the biggest build since mid-November, if confirmed by official data later Wednesday. The API also saw bigger holdings of gasoline and distillates.
Among geopolitical tensions, the United Arab Emirates said that it would withdraw forces from Yemen following a flare-up in tensions with Gulf ally Saudi Arabia over military operations in the conflict-hit country. Saudi Arabia and the UAE are both important members of OPEC.
Elsewhere, traders are tracking a partial US blockade of crude shipments from Venezuela. President Donald Trump has revealed a covert US strike against what he said was a drug-trafficking facility, raising fresh questions about how far Washington is willing to go to pressure the regime of Nicolas Maduro.
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