Oil heads for 7th weekly loss as supply surplus and weak China demand weigh on the market. Even though prices recovered ground on Friday after Saudi Arabia and Russia urged additional OPEC+ members to join output restrictions, oil benchmarks were on the verge of falling for the seventh consecutive week due to concerns about a global supply excess and sluggish demand from China.

By 07:04 GMT, Brent oil futures had increased by $1.54, or 2.1%, to $75.59 per barrel, while U.S. West Texas Intermediate crude futures had increased by $1.39, or 2%, to $70.73 per barrel during the same period.

During the previous session, both benchmarks reached their lowest point since the end of June, indicating that many traders feel the market is now oversupplied or saturated. Contango is a market structure in which front-month prices trade at a discount to prices further out when compared to prices further out. Brent and WTI are both in contango.

Several short sellers liquidated their positions as the oil market was perceived to be oversold. During this time, the falling oil prices compelled OPEC and its allies to strengthen their solidarity to calm the market, according to experts from Haitong Futures in a note.

On Thursday, Saudi Arabia and Russia, the two largest oil exporters in the world, appealed to all and their allies to join an agreement on output limits for the sake of the global economy. This came just a few days after a contentious meeting of the producers’ club.

For the first three months of the following year, the Organization of the Petroleum Exporting Countries and its allies, collectively called OPEC+, had agreed to reduce their production by 2.2 million barrels per day (bpd).

“Despite the pledges made by members of OPEC+, we anticipate that the total production from OPEC+ countries will decrease by only 350,000 barrels per day from December 2023 to January 2024 (from 38.23 million barrels per day to 37.92 million barrels per day),” said Viktor Katona, the lead oil analyst at Kpler.

Katona stated that there is a possibility that some of the OPEC+ nations may not comply with their promises because of the ambiguity of the quota baselines and their reliance on hydrocarbon earnings.

Brent and WTI oil futures are expected to see their worst losses in the past five weeks, with Brent falling 4.2% and WTI falling 4.5% for the week, respectively.

Worries about China’s economy and the rise in oil production in the United States have contributed to this week’s market decline.

According to statistics provided by Chinese customs, the country’s crude oil imports in November decreased by nine percent compared to the same month a year earlier. This decline may be attributed to declining demand from independent refiners, high inventory levels, and adverse economic indicators.

After reaching a four-month high the previous month, gasoline consumption in India dropped in November. This decline was attributed to decreased travel in the world’s third-largest oil consumer, India, due to a festive boost that failed to materialize.

According to statistics released by the United States Energy Information Administration on Wednesday, production in the United States continued to be close to record highs of more than 13 million barrels per day.

A further source of information for the market is the official monthly job report for the United States, which is expected to be released later today.

It is anticipated that the statistics will demonstrate a pickup in job growth during November, as well as a slight salary increase. This would further solidify the belief that the Federal Reserve of the United States has completed its cycle of interest rate hikes.