Oil Reaches Five-Month Low On U.S.-China Trade Hostilities

Meanwhile, the IEA warns of a much larger than expected supply glut: File Image/Pixabay

Trade tensions between Washington and Beijing were again cited as the central driver of oil trading on Tuesday, with two key benchmarks falling about 1.5 percent and reaching five-month lows.

Brent settled down 93 cents, or 1.5 percent, at $62.39 per barrel, and West Texas Intermediate settled down 79 cents, or 1.3 percent, at $58.70.

Also influencing oil traders was the International Energy Agency, which in its latest monthly report released Tuesday predicted that the oil market is facing a surplus next year of nearly 4 million barrels per day (bpd), exacerbated by an output increase of 137,000 bpd  from the Organization of the Petroleum Exporting Countries (OPEC) and chronic perceptions of sluggish demand.

The IEA stated that global oil supply in September was up by 5.6 million bpd from a year ago; it also lowered its demand growth estimates to around 700,000 bpd for 2025 and 2026.

The IEA wrote, "Oil use will remain subdued over the remainder of 2025 and in 2026, resulting in annual gains forecast at around 700,000 barrels per day in both years; this is well below historical trend, as a harsher macro climate and transport electrification make for a sharp deceleration in oil consumption growth."

As for geopolitics, U.S. president Donald Trump recently stating he is considering Ukraine's request for American Tomahawk missiles despite Russia's opposition to the scheme has escalated tensions and said to have kept oil prices from sliding further.

Elsewhere, the first phase of the Gaza peace plan was completed successfully, thus easing supply disruption concerns and nullifying risks of Houthi attacks on vessels crossing the Red Sea.

In other oil news on Tuesday, Egypt's petroleum ministry laid out plans to drill 480 new exploratory oil wells over the next five years to the tune of $5.7 billion, in a bid to reverse years of production decline.

Reportedly, 101 wells are already slated for 2026, and while the ministry didn't specify where the development funds were coming from, Egypt of late has been signing new exploration deals with BP and Eni.