Oil Prices Fall as Oversupply and US-China Trade Tensions Worry Markets

Post by : Saif Nasser

Oil prices declined slightly on Wednesday as investors weighed predictions of a global oil surplus in 2026 and rising trade tensions between the United States and China. Analysts said the combination of too much supply and weaker demand is putting pressure on the market, keeping prices near five-month lows.

Current Market Situation

Brent crude futures fell 21 cents, or 0.3%, to $62.18 per barrel, while U.S. West Texas Intermediate (WTI) crude eased 13 cents, or 0.2%, to $58.57 per barrel by early trading. Both benchmarks had already closed at five-month lows in the previous session.

The International Energy Agency (IEA) recently warned that the global oil market could see a surplus of up to 4 million barrels per day next year. The increase is due to higher production by OPEC+ and other oil producers, while global demand remains slow.

Impact of US-China Trade Tensions

Oil prices are also being affected by renewed trade disputes between the United States and China, the world’s two largest oil consumers. Both countries recently imposed additional port fees on ships carrying goods between them. These fees increase shipping costs and disrupt trade, which may slow economic activity and reduce oil demand.

China has also increased controls on rare earth exports, while U.S. President Donald Trump threatened to raise tariffs on Chinese goods to 100% and tighten software export rules starting November 1. These moves have added to market uncertainty and increased fears of slower global economic growth.

Oil Supply and Inventories

Analysts are watching U.S. oil inventories closely for signs of market balance. Weekly data from industry sources and the U.S. Energy Information Administration (EIA) will provide clues about supply and demand. Preliminary estimates suggest that U.S. crude stockpiles may have risen by about 200,000 barrels in the week to October 10. Gasoline and distillate inventories are expected to have fallen slightly.

Emril Jamil, a senior oil analyst at LSEG, said, “The market is focusing on excess supply amid mixed demand signals. Ebbing geopolitical risks and escalating trade tensions are also adding further pressure on prices.” UBS analyst Giovanni Staunovo added, “Oil prices are currently influenced by trade tensions and market risk sentiment.”

Outlook for Oil Prices

Analysts believe that oil prices may continue to fluctuate as traders react to both supply and trade factors. While OPEC+ and other producers are raising output, slower economic growth and trade disputes could reduce demand. Global oil markets will be closely watching weekly inventory reports and any developments in the U.S.-China trade conflict.

Yang An, an analyst at Haitong Futures, said, “Beyond U.S.-China trade relations and the progress of talks, the key for oil prices now is the degree of oversupply, reflected in changes in global inventories.”

Investors remain cautious, knowing that even small changes in supply, demand, or geopolitical tensions can significantly affect oil prices worldwide.