Oil prices declined on Wednesday, hovering near a five-month low for a second consecutive day, influenced by rising U.S.-China trade tensions and the International Energy Agency’s forecast of a supply glut in 2026.
Brent crude futures dropped 23 cents, or 0.4%, to $62.16 per barrel at 11:11 a.m. EDT (1511 GMT). U.S. West Texas Intermediate futures decreased by 14 cents, or 0.2%, to $58.56. Both benchmarks were on track for their lowest closes since May 7 for the second day running.
Bank of America indicated that Brent prices might fall below $50 a barrel if U.S.-China trade tensions escalate while OPEC+ increases production.
On Tuesday, the IEA projected the global oil market could experience a surplus of up to 4 million barrels per day next year, larger than its previous estimate, as OPEC+ and others boost production and demand remains weak. The trade conflict between the world’s two largest oil consumers rekindled over the past week, with additional port fees imposed by the U.S. and China on their cargo shipments. These tit-for-tat actions could disrupt global shipping routes.
U.S. Treasury Secretary Scott Bessent on Wednesday emphasized that Washington does not wish to intensify the trade dispute, highlighting that President Donald Trump is prepared to meet Chinese President Xi Jinping in South Korea later this month.
Last week, China declared it would tighten rare earth export controls, and Trump threatened to increase tariffs on Chinese goods to 100% and enforce stricter software export restrictions from November 1.
Deflationary pressures continued in China, with both consumer and producer prices falling in September, impacted by a prolonged property market downturn and trade tensions.
In the U.S., investors are increasingly convinced that the Federal Reserve will continue to lower interest rates.
On Tuesday, Fed Chair Jerome Powell suggested that more rate cuts could be on the horizon and indicated the central bank’s long-term effort to reduce its holdings might soon conclude. Easing economic policies can stimulate growth and boost oil demand.
On Wednesday, Britain targeted Russia’s two largest oil companies, Lukoil and Rosneft, and 51 shadow fleet tankers in a new effort to tighten energy sanctions and reduce Kremlin revenues.
Russia was the world’s second-largest crude oil producer after the U.S. in 2024, according to U.S. energy data. Any increase in sanctions due to Moscow’s conflict with Ukraine would likely keep more Russian oil from entering global markets.
In Azerbaijan, oil production fell by 4.2% to 20.7 million metric tons in January-September from 21.6 million metric tons the previous year, the energy ministry reported on Wednesday.
Azerbaijan is part of the OPEC+ alliance, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and its partners.
The American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA) are set to release their weekly U.S. inventory reports on Wednesday and Thursday, delayed by a day due to the U.S. Columbus Day/Indigenous Peoples’ Day holiday on Monday.
Analysts predict U.S. crude inventories increased by about 0.2 million barrels last week. If accurate, this would mark the first time energy companies have added oil to storage for three consecutive weeks since April. This contrasts with a 2.2 million barrel decrease during the same week last year and an average increase of 1.1 million barrels over the past five years (2020-2024).
