Oil prices steady after steep losses in previous session

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices held largely steady on Thursday after declining around 4% in the previous session as investors weighed concerns about global oversupply with looming sanctions against Russia's Lukoil.

Brent crude futures rose 30 cents, or 0.5%, to $63.01 a barrel. U.S. West Texas Intermediate crude increased 20 cents, or 0.3%, to $58.69 a barrel, after a decline of 4.2% on Wednesday.

"There should be considerable support to oil prices around $60/bbl, especially given there could be short-term disruption to Russian export flows once stricter sanctions kick in," said Suvro Sarkar, DBS Bank's energy sector team lead.

The U.S. has hit Lukoil with sanctions as part of its efforts to bring the Kremlin to peace talks over Ukraine. The sanctions prohibit transactions with the Russian company after November 21.

Price gains were held back as a report from the Energy Information Administration showed a larger-than-expected rise in U.S. crude stocks, while gasoline and distillate inventories fell less than expected last week. [EIA/S]

Crude inventories rose by 6.4 million barrels to 427.6 million barrels in the week ended November 7, the EIA said, compared with analysts' expectations in a Reuters poll for a 1.96-million-barrel rise.

The American Petroleum Institute said on Wednesday that U.S. crude stockpiles rose by 1.3 million barrels in the week ended November 7, according to market sources.

Prices fell more than $2 a barrel on Wednesday after the Organization of the Petroleum Exporting Countries said global oil supplies would slightly exceed demand in 2026, a further shift from the group's earlier projections of a deficit.

"Recent (price) weakness seems to be driven by OPEC’s revision of supply-demand balance in 2026 in its monthly report, which confirms the group is now acknowledging the possibility of a supply glut in 2026, in contrast to its more bullish stance all along," DBS's Sarkar said.

OPEC said it expected the supply surplus next year because of wider production increases by OPEC+, a group of producers that includes OPEC members and allies like Russia.

The International Energy Agency raised its global oil supply growth forecasts for this year and next in its monthly oil market report on Thursday, signaling a bigger surplus in 2026.

The U.S. EIA also said in its Short-Term Energy Outlook on Wednesday that U.S. oil production is expected to set a larger record this year than previously forecast.

Global oil inventories will grow through 2026 as production increases faster than demand for petroleum fuels, adding to pressure on oil prices, the EIA added.

The U.S. government is due to lumber back to life on Thursday after the longest shutdown in U.S. history snarled air traffic, cut food assistance to low-income Americans and forced more than 1 million workers to go unpaid for more than a month. 

"The return of the government is going to help support demand in the near term. We should be looking for better demand from those returning to work, holiday travel expectations back on track and of course, holiday shopping season ready to kick off," said Carl Larry, a manager of sales for trading and risk at Enverus.

(Reporting by Stephanie Kelly and Trixie Yap; Additional reporting by Ahmad Ghaddar; Editing by Clarence Fernandez, Ed Osmond and Chris Reese)