Oil prices declined in early trading on Wednesday, continuing the downward trend from the prior session, as investors considered the International Energy Agency’s caution regarding a potential supply surplus in 2026 alongside U.S.-China trade tensions that may adversely affect demand. Brent crude futures experienced a decline of 12 cents, representing a 0.19% decrease, settling at $62.27 per barrel by 0021. Concurrently, U.S. West Texas Intermediate futures saw a reduction of 10 cents, equating to a 0.17% drop, reaching $58.60. Both contracts concluded at their lowest levels in five months during the prior trading session.

The International Energy Agency indicated on Tuesday that the global oil market may encounter a surplus next year of up to 4 million barrels per day, a more substantial excess than previously anticipated, as OPEC+ producers and competitors increase output while demand continues to be weak. The demand outlook is being affected as the United States and China have initiated additional port fees on ocean carriers. Concurrently, Beijing has imposed sanctions on five U.S.-linked subsidiaries of the South Korean shipbuilder Hanwha Ocean.

Last week, trade tensions escalated between the two largest global economies as China revealed a significant expansion of its rare earth export controls. Concurrently, President Donald Trump indicated a potential increase in tariffs on Chinese goods to 100% and proposed stricter software export restrictions effective from November 1.
“Beyond U.S.-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. Traders will be closely monitoring weekly inventory data for insights into U.S. demand. Last week, U.S. crude oil stockpiles are anticipated to have increased, whereas gasoline and distillate inventories are likely to have decreased.

According to a survey, analysts projected an average increase in crude inventories of approximately 200,000 barrels for the week ending October 10. The American Petroleum Institute’s weekly industry report is anticipated at 4:30 p.m. on Wednesday, followed by data at 10:30 a.m. on Thursday. Both reports are delayed by a day due to the Columbus Day/Indigenous Peoples’ Day holiday on Monday.