International oil prices declined on Thursday as markets worried about weak US demand and broad supply surplus, offsetting threats to output from Middle Eastern conflicts and the Russia-Ukraine war.

Brent crude contracts fell $1.12, down 1.66%, to close at $66.37 per barrel.

New York Mercantile Exchange October delivery West Texas Intermediate (WTI) crude contracts dropped $1.30, down 2.04%, to close at $62.37 per barrel.

Commerzbank analyst Carsten Fritsch stated: "Oil prices fell today in response to bearish news from the International Energy Agency, which suggests the oil market will see substantial supply surplus next year."

The International Energy Agency (IEA) said in its monthly report that global oil supply this year will grow faster than expected as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) further increase production.

However, the OPEC report released after the IEA maintained unchanged forecasts for non-OPEC supply and demand this year, citing stable demand.

OPEC+ decided on Sunday to increase production starting in October.

PVM Oil Associates analyst Tamas Varga said the market is caught in a dilemma between perceived supply shortages caused by escalating tensions in the Middle East and Ukraine versus actual supply surplus from OPEC+ production increases and inventory builds.

Multiple trading sources told media on Thursday that Saudi Arabia's crude oil exports to China will surge in October, with Saudi Aramco set to ship approximately 1.65 million barrels per day in October, up from September's allocation of 1.43 million barrels per day.

The U.S. Energy Information Administration said U.S. crude oil inventories increased by 3.9 million barrels for the week ending September 5, compared to expectations for a decline of 1 million barrels.

SEB Research analysts stated that the entire oil market could see substantial surplus by 2026, adding that demand appears to remain stable and may absorb OPEC+'s increased production.