Oil prices fall as trade tensions, supply fears weigh on market

SINGAPORE: Oil prices slipped on Monday, dragged down by renewed concerns over a growing global supply glut and fears of slower energy demand as trade tensions between the United States and China deepened.

Brent crude futures dropped 24 cents to $61.05 a barrel in early Asian trading, while US West Texas Intermediate (WTI) fell 21 cents, or 0.4 percent, to $57.33. The decline erased Friday’s modest gains and followed a rough week in which both benchmarks lost more than 2 percent, marking their third straight weekly fall.

Growing fears of oversupply

Market analysts said the downward trend reflected mounting unease about global supply levels. The International Energy Agency recently projected a potential oil surplus in 2026, raising alarms among investors already rattled by sluggish economic indicators.

“Concerns about oversupply from increased production by oil-producing nations, coupled with fears of an economic slowdown stemming from escalating US-China trade tensions, are fuelling selling pressure,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.

Adding to the uncertainty, traders are watching closely for developments ahead of a planned meeting between US President Donald Trump and Russian President Vladimir Putin. Washington has been tightening sanctions on buyers of Russian crude, leaving some investors hesitant to take new positions.

Trade tensions intensify

Last week, the head of the World Trade Organization urged both the US and China to ease tensions, warning that a long-term economic decoupling between the world’s two largest economies could cut global oil output by as much as 7 percent.

The two nations have recently exchanged new tariffs and port fees on cargo ships, a move that could disrupt global shipping routes and add pressure on international trade.

Meanwhile, Trump and Putin have agreed to hold another summit on the war in Ukraine, even as Washington calls on India and China to reduce imports of Russian oil. Following talks with Ukrainian President Volodymyr Zelenskiy on Friday, Trump said both sides should “stop the war immediately,” even if it involves territorial compromises.

Production increases add pressure

On the supply side, data from energy services firm Baker Hughes showed that US energy companies added oil and natural gas rigs last week for the first time in three weeks. The rise in rig count further heightened concerns about swelling output at a time when global demand growth remains uncertain.

With geopolitical tensions rising and supply concerns deepening, analysts expect oil markets to remain volatile in the days ahead.