Oil Slides to Five Month Low on Supply Glut Warnings and U.S.China Tensions

Highlights:

• Oil prices dropped to a five-month low, with West Texas Intermediate (WTI) trading near US $59 a barrel and Brent crude around US $62 at the time of writing, pressured by rising global supply concerns.
• The International Energy Agency (IEA) raised its forecast for a record crude surplus of nearly 4 million barrels per day in 2026, signaling an unprecedented imbalance between supply and demand.
• U.S.–China trade tensions intensified after Beijing imposed limits on several U.S.-linked entities, dampening market sentiment and weighing further on energy demand expectations.

Oil prices tumbled as concerns about a looming global oversupply and renewed U.S.–China trade tensions rattled markets. At the time of writing, West Texas Intermediate (WTI) hovered around US $59 a barrel, its lowest since May, while Brent crude lingered near US $62.

Oversupply Looms: IEA Raises Caution Flag

The International Energy Agency (IEA) revised its outlook for 2026, anticipating that global crude production could surpass consumption by almost 4 million barrels per day, signaling a significant oversupply risk. The agency cited rising production from OPEC+ countries and non-OPEC producers as key drivers of this imbalance. Meanwhile, demand growth is expected to lag, creating a structurally bearish backdrop.

Trade Fallout Adds to Downward Pressure

Adding to the gloom, escalating trade conflict between the U.S. and China dampened investor sentiment, especially for commodity and energy exposure. China recently imposed restrictions on several U.S.-linked

entities within a major South Korean shipbuilder and threatened further retaliatory steps. These developments contribute to fears of a slowdown in global growth, which would weaken oil demand further.

Market Reaction & Technicals

The dual pressures of surplus risk and geopolitical concerns pushed oil markets into negative territory. WTI dropped about 1.3%, reflecting mounting investor caution. The move underscores how sensitive oil markets are to macro signals, especially when both supply and demand outlooks are faltering. Technically, a breach of support levels near US $58–59 for WTI and US $61–62 for Brent could prompt further declines unless fundamental sentiment shifts.

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