Oil Prices Decline Amid Growing Concerns Over Supply Surplus

Sada News - Oil prices declined on Monday under pressure from fears of a global supply surplus, while escalating trade tensions between the United States and China increased concerns about economic slowdown and weak energy demand.

Brent crude futures dropped approximately 0.3%, reaching $61.09 per barrel, while West Texas Intermediate (WTI) futures fell 0.3%, settling at $57.35, erasing the gains recorded on Friday.

Both benchmark crudes recorded a decline of more than 2% last week, marking the third consecutive weekly drop, which is partly attributed to the International Energy Agency's forecasts of increased supply surplus by 2026.

Toshitaka Tazawa, an analyst at Fujitomi Securities, told Reuters: "Fears of a supply surplus due to increased production from oil-producing countries, along with concerns about economic slowdown resulting from escalating trade tensions between the US and China, are fueling selling pressure."

He added: "As the US intensifies its pressure on buyers of Russian crude, the anticipated summit between US President Donald Trump and Russian President Vladimir Putin adds further uncertainty to the outlook, making it difficult for some investors to adjust their positions."

Last week, the head of the World Trade Organization urged the US and China to ease their trade tensions, warning that decoupling between the world’s two largest economies could reduce global economic output by 7% in the long term.

The two nations, the largest consumers of oil globally, recently reignited their trade war by imposing additional port tariffs on ships transporting goods between them, a reciprocal step that could disrupt global shipping flows.

Meanwhile, Trump and Putin agreed on Thursday to hold another summit regarding the war in Ukraine, even as Washington simultaneously pressured India and China to halt their purchases of Russian oil.

Following his talks with Ukrainian President Volodymyr Zelensky at the White House on Friday, Trump urged both Ukraine and Russia to "immediately stop the war," even if it meant Ukraine conceding territory.

Trade sources and analysts indicated that US and European pressure on Asian buyers of Russian energy could limit India’s oil imports starting December, leading to lower supply prices for China.

Regarding supply, US energy companies added oil and natural gas drilling rigs last week for the first time in three weeks, according to a widely followed report by Baker Hughes released on Friday.