Oil prices fell more than 1% on Wednesday, weighed down by oversupply in the market despite expectations that an end to the longest-ever U.S. government shutdown could boost oil demand.
Brent crude futures slipped 88 cents, or 1.35%, to $64.28 a barrel by 1332 GMT after gaining 1.7% on Tuesday. U.S. West Texas Intermediate crude was down 87 cents, or 1.43%, at $60.17 a barrel, after climbing 1.5% in the previous session.
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“Overall, both WTI and Brent remain well and truly stuck, with short-term speculative trading providing most of the activity,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Analysts have previously highlighted that crude oversupply is curbing price gains. Earlier this month OPEC+ agreed to a pause in increasing its output in the first quarter of next year, after having unwound its cuts to production since August this year.
But the reopening of the U.S. government could boost consumer confidence and economic activity, spurring demand for crude oil, IG market analyst Tony Sycamore wrote in a note.
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The U.S. Republican-controlled House of Representatives is set to vote later on Wednesday on a bill, already signed off by the Senate, that would restore funding to government agencies through January 30.
“So while the long-term demand outlook remains robust, the short-term outlook still points to ample supply limiting the upside potential,” Saxo Bank’s Hansen added.
Meanwhile, the International Energy Agency forecast in its annual World Energy Outlook on Wednesday that oil and gas demand could continue to grow until 2050.
The projection was a departure from the IEA’s previous expectation that global oil demand would peak this decade, as the international body moved away from a forecasting method based on climate pledges back to one that takes into account only existing policies.
Another report by the Organization of the Petroleum Exporting Countries, Russia and other allies noted that world oil supply would match demand next year due to the wider OPEC+ group’s production increases – a shift from its earlier projections of a supply deficit in 2026.
The U.S. Energy Information Administration will release its outlook later in the day.
