Oil prices fell as market fundamentals focused on oversupply and US-China trade tensions
Oil prices continued to fall on Wednesday as investors assessed the International Energy Agency's (IEA) warning of a supply glut in 2026 and the potential for US-China trade tensions to dampen demand.
Brent crude futures fell 9 cents, or 0.14%, to $62.30 a barrel by 6:40 a.m. GMT, while WTI crude futures fell 3 cents, or 0.05%, to $58.67 a barrel.
Both contracts closed at five-month lows in the previous trading session.
The International Energy Agency (IEA) said on Tuesday that the global oil market could face an oversupply of up to 4 million barrels per day next year, a larger than previously anticipated glut as OPEC+ producers and rivals increase production and demand remains weak.
So, the market is focusing on oversupply amid mixed demand signals. For now, easing geopolitical risks are weighing down the price pressure of escalating trade tensions.
Trade tensions between the US and China have recently escalated again, and the risks this poses to the global economy are in focus.
The trade dispute between the US and China, the world's two largest oil consumers, flared up again last week when both countries imposed additional port fees on ships carrying cargo between them.
This will increase trade costs and disrupt freight flows, potentially leading to lower economic output.
Tensions between the world's two largest economies intensified last week following the announcement of a significant expansion of rare earth export controls, Trump's raising of tariffs on Chinese goods to 100% and his threat to tighten software export restrictions starting November 1st.
Beyond the progress of US-China trade relations and negotiations, the most critical factor for oil prices right now is the level of oversupply reflected in changes in global inventories.
For a view on US demand, investors will await weekly inventory data. According to a preliminary survey, US crude oil inventories are expected to rise last week, while gasoline and distillate inventories are likely to fall.
Analysts estimated that crude oil inventories increased by an average of 200,000 barrels in the week to October 10.
The American Petroleum Institute (API)'s weekly industry report is due on Wednesday at 8:30 PM GMT, while data from the US Energy Information Administration (EIA) is due on Thursday at 2:30 PM GMT.
Both reports are being released one day late due to the Columbus Day/Indigenous Peoples' Day holiday celebrated on Monday.
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