Week in Review – Oil Prices Trend Lower Following Recovery in Middle East Exports

Oil prices are heading toward another weekly decline as recovering production and exports from the Middle East begin to outpace global demand. West Texas Intermediate (WTI) crude futures were trading relatively flat Friday morning but remained on track for a weekly decline of approximately $2 per barrel. Brent crude was trading near $95.71 per barrel, down 0.1%, following a new report from the International Energy Agency (IEA) indicating that the global oil market is returning to a supply surplus.

The IEA now expects global oil supply to exceed demand during the fourth quarter of 2026, reversing its previous forecast of a supply deficit. According to its latest report, global oil production is expected to average 105 million barrels per day during the quarter, approximately 1.7 million barrels per day more than projected consumption. The change reflects a faster recovery in Middle Eastern exports, even as elevated oil prices have been reducing demand.

Despite ongoing shipping disruptions, Gulf producers have found alternative ways to move crude oil, including ship-to-ship transfers and expanded pipeline capacity. These adjustments have allowed more oil to reach international markets, even as security threats continue to affect tanker traffic through the Strait of Hormuz. OPEC+ production has also increased significantly, reaching 41.23 million barrels per day in October, approximately 2.04 million barrels per day more than in September. That represents a recovery to 97% of the group's pre-war February production levels.

While production continues to recover, global oil consumption is moving in the opposite direction. The IEA forecasts that worldwide demand will decline by 2.7 million barrels per day this year to 102.3 million barrels per day, reflecting the impact of elevated prices on consumption. With more oil entering the market and demand weakening, the balance between supply and consumption has shifted considerably from earlier this year.

Adding to this change, IEA member countries are accelerating the release of the remaining 71 million barrels of emergency oil reserves pledged earlier this year. The additional volumes, which include 15 million barrels of diesel, are expected to become available by the end of February. These releases are intended to ease supply tightness, particularly in refined products, while providing additional volumes to a market already seeing recovering production.

However, improving supply conditions do not mean the risks of further disruptions have disappeared. On Friday, Iran's Revolutionary Guards navy reported that a tanker carrying liquefied natural gas struck a naval mine and suffered an explosion in the Strait of Hormuz. The incident followed reports Thursday that four oil tankers had been damaged by explosions in the same waterway. According to the Washington Institute for Near East Policy, at least 10 vessels were attacked during the first 10 days of November, following 37 attacks in October, the highest monthly total since the conflict began in late February.

These attacks demonstrate why oil prices remain sensitive to developments in the Middle East, even with global supply recovering. Producers have managed to restore much of their output and exports, but the transportation routes supporting those shipments remain exposed to security threats.

In the United States, efforts to maintain fuel transportation flexibility are also continuing. The Trump administration is expected to extend a waiver of the Jones Act, which generally requires cargo moving between U.S. ports to be transported on American-built, American-owned, and American-crewed vessels. The waiver allows certain foreign-flagged ships to transport oil between domestic ports. The previous extension, issued in August, is scheduled to expire November 15.

Meanwhile, the latest U.S. inventory figures show that crude oil and refined products are experiencing different supply trends. On Wednesday, EIA reported that commercial crude inventories fell by 4.7 million barrels during the week ending November 6, considerably more than the 1.1 million-barrel decline expected by analysts surveyed by Reuters. Crude inventories remain approximately 4% below their five-year seasonal average.

Gasoline and distillate inventories, however, increased more than expected. Gasoline stocks rose by 1.8 million barrels, compared with expectations for a 100,000-barrel decline, while distillate inventories increased by 4.1 million barrels, despite forecasts for a 1 million-barrel draw. Gasoline inventories now stand approximately 1% above their five-year average, while distillates, including diesel and heating oil, remain 8% below normal seasonal levels. Although the latest increases point to improved near-term product availability, diesel inventories remain relatively tight compared with historical averages.

Prices in Review

Crude prices moved lower early in the week, then stabilized and recovered some of the losses by Friday. After opening at $90.83 on Monday, prices dropped to $86.43 on Tuesday. Prices showed little movement on Thursday, with crude opening at $86.50, before climbing to $88.79 on Friday. Despite the late-week recovery, crude prices declined by $2.04 per barrel, representing an approximate 2.2% decrease for the week.

Diesel prices declined during the first half of the week before gaining ground in the final two sessions. Prices started at $4.3800 on Monday and fell to $4.1840 on Tuesday, followed by another drop to a weekly low of $4.1400 on Wednesday. Diesel prices then reversed direction, rising to $4.2090 on Thursday and $4.2880 on Friday, recovering some of the earlier losses. Overall, diesel prices decreased by $0.0920 per gallon, representing an approximate 2.1% decline for the week.

Gasoline prices remained under pressure for most of the week before a rebound on Friday. Opening at $2.7682 on Monday, prices fell to $2.6326 on Tuesday and edged slightly lower to $2.6319 on Wednesday. The decline continued on Thursday, when gasoline reached a weekly low of $2.5960, before recovering to $2.6749 on Friday. Despite the late-week increase, gasoline prices were $0.0933 per gallon lower, representing an approximate 3.4% decrease for the week.