WTI hovers near five-month low of $57 amid US-China tensions, supply glut worries

The global oil market is experiencing a sharp decline, with both major benchmarks, Brent and West Texas Intermediate (WTI), suffering substantial losses over the past month. Brent crude has declined significantly, dropping nearly 10% in this period, and is currently trading around $60.81, indicating a wave of bearish sentiment.

Similarly, WTI futures have fallen over 10% in the past month, now around $57.34. The decline shows an even steeper drop over a longer period, with WTI prices down more than 18% over the past year.

WTI crude oil remained near a five-month low on Friday amid ongoing US-China trade tensions and concerns about a potential supply glut in 2026. Additionally, the prices declined, indicating a possible weekly loss after U.S. President Donald Trump and Russian President Vladimir Putin agreed to meet and discuss ending the Ukraine war.

Rahul Kalantri, VP Commodities at Mehta Equities Ltd., states that crude oil prices experienced sharp volatility and declined once again after the U.S. President announced the termination of certain trade ties with China. An oversupplied market, following larger OPEC+ output hikes and weakening demand amid the U.S. government shutdown, added further pressure on prices. “U.S. crude inventories also rose more than expected last week, reflecting softer demand. However, expectations of Federal Reserve rate cuts and profit-taking in the dollar index may provide some support to crude prices at lower levels.”

Crude prices declined due to concerns over weak demand and an expected supply glut, with increased U.S. inventories also pressuring prices. Kyiv’s reduction in strikes against Russia’s oil industry might indicate fewer supply disruptions. Such a trend could boost global oil supplies, which is unfavourable for oil prices.

However, Kaynat Chainwala, AVP of Commodity Research at Kotak Securities, says, "China sanctioned five US entities linked to Hanwha Ocean Co., one of South Korea’s largest shipbuilders, accusing them of supporting US government actions against China’s maritime, logistics, and shipbuilding sectors, which reignited worries about the US-China trade war."

Meanwhile, the International Energy Agency (IEA) warned of a potential 4 million bpd oil market surplus next year, citing rising supply and weak demand. The IEA lowered its global oil demand growth forecast to 700,000 bpd for both 2025 and 2026, in contrast to OPEC’s more optimistic outlook of 1.3 million bpd growth in 2025 and 1.4 million bpd in 2026. Additionally, OPEC+ production increased for the second consecutive month in September, with output rising by 559,000 bpd, slightly above the 547,000-bpd increase in quotas.

“Prices found some support today, trading near $59/bbl, after Trump said Prime Minister Modi pledged to stop buying Russian barrels, which could tighten supply since Russia accounts for about one-third of India’s oil imports in 2024-25, roughly 1.6 to 1.7 million bpd," said Chainwala.