Oil prices extended losses on Wednesday, reflecting investor caution over a potential oversupply in 2026 and the renewed trade tensions between the United States and China, two of the world’s largest oil consumers.
Brent crude futures were down 21 cents, or 0.3 per cent, at $62.18 per barrel around 10 AM, while US West Texas Intermediate (WTI) eased 16 cents, or 0.3 per cent, to $58.54 per barrel, reported Reuters.
Both benchmarks had closed at five-month lows during the previous trading session, highlighting the sustained pressure on crude prices.
Oversupply Concerns Loom
The International Energy Agency (IEA) raised concerns on Tuesday that the global oil market could face a surplus of up to 4 million barrels per day in 2026. This is a larger glut than previously forecast, as production from OPEC+ members and other major producers continues to rise while demand remains sluggish.
“The market is focusing on excess supply amid mixed demand signals. Ebbing geopolitical risks and escalating trade tensions are also adding further pressure on prices,” said Emril Jamil, senior oil analyst at LSEG.
The IEA’s warning has prompted investors to closely monitor production levels and inventory data, with oversupply emerging as the central concern for global crude markets.
US-China Trade Tensions Add to Pressure
Oil markets are also responding to a fresh surge in trade tensions between the United States and China. Last week, China expanded its rare earth export controls, prompting a response from the US, including threats of 100 per cent tariffs on Chinese exports and tightened restrictions on software exports from November 1.
“The focus will remain on the recent re-escalation in trade tensions between the US and China and the risks it brings to the global economy,” noted Tony Sycamore, market analyst at IG.
These developments are expected to increase shipping costs and disrupt freight flows, potentially slowing economic activity and curbing oil demand.
Market Eyes Inventory Reports
Analysts are closely watching US crude inventory data for signs of demand trends. A preliminary Reuters poll indicates that US crude stockpiles likely rose by around 200,000 barrels in the week ending October 10, while gasoline and distillate inventories may have fallen.
Traders await the weekly industry report from the American Petroleum Institute on Wednesday and the US Energy Information Administration report on Thursday. Both reports were delayed due to the Columbus Day/Indigenous Peoples’ Day holiday on Monday.
“Beyond US-China trade relations and the progress of talks, the key for oil prices now is the degree of oversupply, reflected in changes in global inventories,” said Yang An, analyst at Haitong Futures.
With supply concerns mounting and geopolitical uncertainty persisting, oil traders remain cautious, weighing the balance between slowing demand and potential oversupply in the coming months.
