Oil dips near two-month low, Brent crude falls below $87 per barrel

Both benchmarks closed Friday at their lowest since Sept. 27, extending losses for a second week, with Brent down by 9 percent and WTI by 10 percent.

The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into a contango, reflecting dwindling supply concerns.

Tight crude supplies in Europe have eased as refiners have piled up stocks ahead of the Dec. 5 European Union embargo on Russian crude, putting pressure on physical crude markets across Europe, Africa and the United States.

The EU's energy policy chief told Reuters the EU expected to have its regulations completed in time for the introduction of a G7 plan to cap the price of Russian crude on Dec. 5.

RBC Capital analyst Mike Tran said the weak December WTI contract expiration indicated paper market selling rather than true physical market softness.

"Tight global inventories do not support the traditional surplus of barrels rationale for contango," he said in a note.

While North Sea and West African spot market indicators are far from strong, they are also not suggesting signs of distress, he added.

Diesel markets remained tight, with Europe and the United States competing for barrels. While China nearly doubled its diesel exports in October from a year earlier to 1.06 million tonnes, the volume was well below September's 1.73 million tonnes.

Demand in the world's top crude importer remains bogged down by COVID-19 restrictions while expectations of further interest rate rise elsewhere have elevated the greenback, making dollar-denominated commodities more expensive for investors.