It's been a bad week for oil, deep weekly loss expected

Oil steadied after a sharp two-day drop, with prices still on course for a substantial weekly decline on prospects of more supply from OPEC members Saudi Arabia and Libya.

Brent crude traded near $72 a barrel and is about 3.5% lower this week, with West Texas Intermediate below $68. Saudi Arabia was said to be committed to higher production, the Financial Times reported on Thursday. Rival Libyan factions agreed to appoint a new central bank governor, paving the way for resolving a row that’s slashed oil output.

“A compromise between the conflicting parties in Libya is emerging, which means that the export ban could be lifted shortly,” Commerzbank AG analysts, including Carsten Fritsch and Barbara Lambrecht, said in a report. If OPEC+ increases output in December “the oil market will potentially face a considerable oversupply in the coming year.”

Crude is on track for a quarterly decline, with OPEC+’s plans to ease voluntary supply curbs, as well as top importer China’s tough economic outlook, weighing on futures. The Asian nation unveiled a slew of monetary and fiscal stimulus measures this week, aiding stocks as well as some commodities, but their effectiveness remains uncertain.

Futures have been whipsawed this week, with still-elevated tensions in the Middle East adding some bullishness. Israel has vowed to maintain its bombardment of Hezbollah targets in Lebanon indefinitely, undermining efforts to secure a cease-fire deal that would ease the risk of a regional war.

The swings in prices have pushed a gauge of implied volatility for Brent higher. Options markets are now pricing in a lower risk of oil futures spiking, with the premium of bearish puts — which profit from lower prices — over bullish calls growing in recent days.

Elsewhere, Hurricane Helene barreled into the western coast of Florida, packing dangerous winds and threatening to unleash deadly flooding across several states. The storm had shut in about a quarter of Gulf of Mexico oil production as of Thursday, according to the Bureau of Safety and Environmental Enforcement.