Oil Prices Fall Amid US-China Trade Tensions And Rising Global Supply Concerns
Both benchmarks had already suffered more than 2 per cent losses last week, marking their third consecutive week of decline, partly influenced by the IEA's projection of a growing supply glut in 2026.
Global oil markets took a cautious turn on Monday as concerns over a potential oversupply and renewed US-China trade tensions put pressure on prices, raising questions about the outlook for global energy demand.
Brent crude futures slipped 24 cents, or 0.4 per cent, to $61.05 a barrel in early trading today, while US West Texas Intermediate (WTI) futures declined 21 cents, or 0.4 per cent, to $57.33 a barrel, erasing the modest gains registered on Friday, reported Reuters.
Both benchmarks had already suffered more than 2 per cent losses last week, marking their third consecutive week of decline, partly influenced by the International Energy Agency's projection of a growing supply glut in 2026.
Rising Global Supply Concerns
"Concerns about oversupply from increased production by oil-producing nations, coupled with fears of an economic slowdown stemming from escalating US-China trade tensions, are fuelling selling pressure," said Toshitaka Tazawa, analyst at Fujitomi Securities.
Tazawa added that the geopolitical backdrop was further complicated by the US increasing pressure on buyers of Russian crude, alongside an upcoming summit between US President Donald Trump and Russian President Vladimir Putin, adding an element of uncertainty that made investors hesitant to adjust positions.
Trade Tensions Weigh on Market Sentiment
Last week, the head of the World Trade Organisation urged the US and China to de-escalate their trade tensions, warning that a decoupling between the two largest economies could reduce global economic output by up to 7 per cent over the long term.
The renewed trade war has already seen both nations imposing additional port fees on ships carrying cargo between them, sparking concerns about disruptions to global freight flows.
The dual pressures of slowing economic growth and potential supply imbalances have led traders to adopt a cautious stance. Analysts note that any prolongation of the trade standoff could dampen energy consumption, particularly in the industrial and manufacturing sectors in both countries, which remain major drivers of oil demand.
Geopolitical Uncertainty and Russian Oil
In parallel, Trump and Putin agreed on Thursday to hold another summit on the ongoing war in Ukraine. Meanwhile, US and European pressure on Asian buyers of Russian energy could limit India’s oil imports from December, potentially leaving more affordable supplies available to China, trade sources said.
In a related development, following talks with Ukrainian President Volodymyr Zelenskiy at the White House, Trump called on both Ukraine and Russia to "stop the war immediately," even if it meant Ukraine conceding territory.
Adding to the market complexity, US energy firms increased oil and natural gas rig counts last week for the first time in three weeks, according to Baker Hughes’ latest report. While this uptick is modest, it signals a continued commitment by US producers to expand output despite global market uncertainties.
With Brent and WTI both hovering near multi-month lows, the oil market remains sensitive to any developments in trade negotiations, geopolitical conflicts, and supply forecasts.
Analysts suggest that while short-term price swings may persist, long-term market dynamics will depend on the resolution of US-China tensions and the broader trajectory of global economic growth.
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