Oil prices fell in early Asian trading on Monday, as a combination of rising supply concerns and escalating trade tensions between the United States and China weighed on sentiment.
At the time of writing, Brent crude oil futures had fallen 0.29% to $61.11, while WTI was down 0.35% to $57.34. The continued decline comes on the heels of a third consecutive weekly decline for both benchmarks, with a decline of more than 2% in each of the past weeks. Concerns about weakening demand and a looming oversupply are the key factors dragging prices down, with declining geopolitical risk also weighing on oil.
The International Energy Agency recently raised its forecast for global oil supply growth and warned of a supply glut in 2026. At the same time, OPEC+ has been withdrawing its production cuts and the ceasefire in Gaza has reduced concerns of a major supply disruption in the Middle East.
A Tokyo-based analyst, Toshitaka Tazawa of Fujitomi Securities, summed up the situation by saying: “Concerns about oversupply due to increased production by oil-producing nations, along with fears of an economic slowdown stemming from escalating trade tensions between the United States and China, are fueling selling pressure.”
Tensions between the United States and China have recently flared, with each side imposing additional port fees on cargo shipments, measures that could slow cargo flows and undermine global growth. A prolonged decoupling of the two largest energy consumers could drastically reduce oil demand.
At the same time, U.S. oil production rose last week to another record high, showing there is even more supply available.
While U.S. pressure on countries that buy Russian crude could drive down prices, there is a lot of uncertainty about whether or not those purchases will slow.
By Charles Kennedy for Oilprice.com
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