Oil prices set for weekly gains despite oversupply concerns

Investing.com-- Oil prices steadied Friday after sharp declines in the previous session, but were still on course for weekly gains after the surge at the start of the week as the U.S. and China agreed to temporarily lower soaring tariffs placed on each other.

At 08:00 ET (12:00 GMT), Brent Oil Futures were 0.4% higher to $64.77 per barrel, while West Texas Intermediate (WTI) crude futures edged up 0.3% to $61.83 per barrel.

U.S., Iran close to signing nuclear deal

Both contracts declined more than 2% on Thursday after U.S. President Donald Trump said that the U.S. was getting very close to securing a nuclear deal with Iran, and Tehran had "sort of" agreed to the terms.

A NBC News report also indicated on Thursday that Iran is prepared to sign a nuclear agreement if all economic sanctions are lifted, citing Ali Shamkhani, a top political and nuclear adviser to Supreme Leader Ayatollah Ali Khamenei.

The signing of a deal and the removal of sanctions could see Iranian oil returning to the market in force, potentially loosening the global crude supply-demand balance.

"A nuclear deal that lifts sanctions will obviously remove a lot of the supply risk hanging over the market for some time now," said analysts at ING, in a note. "In addition, it would allow Iran to increase oil output with more willing buyers for its oil. This could result in additional supply in the neighborhood of 400k b/d."

Global oil supply to rise this year - IEA

The International Energy Agency (IEA) said on Thursday that global oil supply will rise faster than previously expected this year as OPEC+ members unwind output cuts.

The IEA projected that global oil supply is set to increase by 1.6 million barrels per day in 2025, and is expected to rise by a further 970,000 bpd in 2026.

The body also estimated that global oil demand growth will slow from 990,000 b/d in the first quarter to 650,000 b/d for the remainder of the year. 

“Signs of a slowdown in global oil demand growth may already be emerging and will be tracked closely,” the agency said.

Weekly gains likely

However, despite these potential supply pressure, both Brent and WTI contracts are up around 1.5% so far this week.

Sentiment was boosted when the U.S. and China, the world’s two biggest oil consumers and economies, agreed to a 90-day pause on their trade war during which both sides would sharply lower trade duties.

The hefty reciprocal tariffs had raised fears of a sharp blow to global growth and oil demand.

Ayushman Ojha contributed to this article.