Oil Prices Slip as Traders Focus on Oversupply Fears and Renewed U.S - China Trade Tensions

Oil futures continued to decline midweek as investors assessed warnings of excess supply and geopolitical uncertainty. Brent crude dropped 0.3% to $62.18 per barrel, while U.S. West Texas Intermediate eased 0.2% to $58.57. Both benchmarks had already settled at five-month lows in the previous session.

The International Energy Agency (IEA) forecasted on Tuesday that the global oil market could face a surplus of up to 4 million barrels per day next year, exceeding earlier projections. The agency cited rising output from OPEC+ producers and sluggish demand growth as key drivers behind the expected imbalance.

“Markets are now fixated on oversupply risks amid mixed signals on consumption,” said Emril Jamil, senior oil analyst at LSEG. “Easing geopolitical concerns and renewed trade tensions are further weighing on sentiment.”

The latest strain between Washington and Beijing - the world’s two largest oil consumers - has added to the pressure. Both countries recently imposed new port fees on cargo shipments, increasing trade costs and disrupting freight flows. Analysts fear that the move could lower global economic output and weaken oil demand.

Tensions intensified after China tightened export controls on rare earth materials and U.S. President Donald Trump threatened to raise tariffs on Chinese imports to 100% starting November 1. “Oil prices are being driven by trade developments and overall market risk sentiment,” noted Giovanni Staunovo, analyst at UBS.

Beyond geopolitics, traders are watching U.S. inventory data for further clues on demand trends. A Reuters poll of six analysts estimated that crude stockpiles likely rose by about 200,000 barrels last week, while gasoline and distillate inventories may have fallen. Updated data from the American Petroleum Institute and the U.S. Energy Information Administration are due later this week, both delayed by the holiday schedule.

With mounting evidence of oversupply and renewed economic headwinds, oil markets appear set for continued volatility. Analysts suggest that the balance between production growth and global demand recovery will determine whether prices stabilize or fall further in the coming months.