Oil prices were down on Monday as investors weighed a potential global glut, with US-China trade tensions adding to concerns about an economic slowdown and weaker energy demand.
Brent crude futures depleted by 28 cents or 0.46 per cent to trade at $61.01 a barrel while the US West Texas Intermediate (WTI) futures lost 2 cents or 0.03 per cent to close at $57.52 per barrel.
The decline was the lowest for the two crude oil grades since early May as oil traders’ concerns have shifted from under-supply to over-supply.
Market analysts noted that glut fears are now descending onto the market, particularly looking forward into 2026, with current crude futures loadings now trading below those for later loading, a structure known as contango. Previously, the market had been in backwardation, which is where prompt prices trade at a premium to later supply.
This encourages traders to pay for storing oil so it can be sold at higher prices when supplies are expected to have shrunk in the future.
Last week, prices fell 2 per cent marking their third consecutive weekly decline, partly due to the International Energy Agency’s outlook for a growing supply glut in 2026.
Outlook from the IEA, which advises industrialised countries, expands its prediction of a 2026 surplus from about 3.3 million barrels per day last month. Analysts noted that a surplus of 4 million barrels per day would be equal to almost 4 per cent of world demand.
The Organisation of the Petroleum Exporting Countries and other allies (OPEC+) have also decided to unwind some output cuts more rapidly than earlier scheduled and the extra supply is adding to fears of a glut and weighing on oil prices this year.
Pressure comes as the world’s two top oil consumers, the US and China, have renewed their trade war, imposing additional port fees on ships carrying cargo between them which could disrupt global freight flows.
While President Trump expressed optimism about reaching a very strong trade deal with President Xi, underlying frictions remain unresolved, including on tariffs, technology access, and supply-chain issues. These unresolved matters continue to cloud China’s economic outlook and, by extension, oil demand.
China’s crude oil flows also signal softness, with imports in September falling to about 11.5 million barrels per day, the lowest level since January, and refinery throughput climbing which reduces the spare capacity for imports and stock-building.
Also, uncertainty remains over what may happen with Russian oil supply, with President Trump hinting that the US would maintain “massive” tariffs on India unless it stops buying Russian oil.