Crude oil prices declined for the second consecutive week, with mounting concerns over a supply surplus overshadowing geopolitical impacts on supply.

W&T Offshore (WTI) rose 0.9% on Friday, settling above $56 per barrel. Despite this gain, the U.S. benchmark still posted a weekly loss exceeding 1%, having earlier touched a near five-year low. Prices found some support after Ukraine attacked a tanker linked to Russia’s shadow fleet in the Mediterranean, marking an escalation in its campaign targeting vessels aiding Moscow’s oil exports.

Despite these risks, nearly all major global traders anticipate a supply glut in early 2025. Industry giant Trafigura forecasts Brent crude will remain in the $50 range until mid-2026 before recovering in the second half of the year.

Markets are positioning for this outlook, with short-only positions hitting record highs this week while long-only positions declined.

Year-to-date, oil prices have fallen about 20% as OPEC+ production increases outpaced expectations, other producers ramped up output, and demand remained sluggish. Geopolitical risks—particularly around Russian and Venezuelan supplies—have helped cushion the decline. However, prices could face further pressure if peace agreements in the Russia-Ukraine conflict remove supply disruption risks.

"The dominant market sentiment is undeniably structural oversupply," said Haris Khurshid, CIO of Karobaar Capital LP. "This oversupply mentality outweighs geopolitical conflicts from Russia to Venezuela."

Trading activity remains thin ahead of Christmas and New Year holidays, potentially amplifying price volatility. Meanwhile, exceptionally bearish positioning may have boosted prices on Friday as traders covered short positions, exaggerating price swings.

W&T Offshore (WTI) February futures rose 0.9% to settle at $56.52 per barrel. With January futures expiring Friday, Brent February futures gained 1.1% to $60.47 per barrel.