Oil prices settled at their lowest levels since early May on Monday, pressured by growing fears of a potential global supply glut and renewed U.S.-China trade tensions that have heightened concerns over a slowdown in economic activity and weaker energy demand, Reuters reported.
Brent crude futures closed down 28 cents, or 0.46%, at $61.01 a barrel, while U.S. West Texas Intermediate (WTI) futures slipped 2 cents, or 0.03%, to $57.52.
Both benchmarks fell by more than $1 earlier in the session and ended the day at their weakest levels in over five months.
Market sentiment has shifted sharply from concerns about supply shortages to worries about oversupply, reflected in the futures structure of global benchmark Brent.
The six-month spreads for both Brent and U.S. crude now show near-term contracts trading below those for later delivery, a structure known as contango, which incentivizes traders to store oil and sell it later at higher prices when inventories are expected to decline.
The Brent contango, which reappeared last Thursday for the first time since a brief occurrence in May, widened to its largest level since December 2023.
Similarly, the contango in U.S. crude futures emerged on Friday for the first time since January 2024.
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“These glut fears are now descending onto the market, particularly looking forward into 2026. We will start to see floating storage pick up and inland tanks get filled,” said John Kilduff, partner at Again Capital. “This is a real bearish narrative that we have not seen in some time,” he added.
Both Brent and WTI benchmarks declined more than 2% last week, marking their third straight weekly loss, partly influenced by the International Energy Agency’s projection of a growing global supply surplus by 2026.
Earlier this year, both contracts had largely traded in the opposite market structure, known as backwardation, where prompt delivery prices exceed future prices, a sign of tight near-term supply and robust demand.
Tensions between the world’s two largest oil consumers, the United States and China, have further weighed on market sentiment.
The two nations have reignited their trade war, imposing new port fees on cargo shipments between them in tit-for-tat moves that threaten to disrupt global freight flows.
Last week, the head of the World Trade Organization urged both sides to de-escalate tensions, warning that a full economic decoupling between the U.S. and China could reduce global output by 7% over the long term.
Partially offsetting Monday’s losses was news that a major lobbying group, whose board includes U.S. companies such as Oracle, Amazon, and Exxon Mobil, has urged President Donald Trump’s administration to immediately suspend a rule that has halted billions of dollars’ worth of U.S. exports.
The group warned the rule could push China and other nations to cut U.S. firms out of their supply chains.
Uncertainty also lingers over Russian oil exports. Trump reiterated on Sunday that the U.S. would maintain “massive” tariffs on India unless it stops purchasing Russian oil.
On the domestic front, U.S. energy firms added drilling rigs last week for the first time in three weeks, according to data from Baker Hughes.
“Near term, the market is sitting in a classic shoulder-season mix of refinery maintenance, softer product cracks and a watchful eye on weekly U.S. inventory data,” analysts at energy consultancy Gelber and Associates said in a note.
Adding further downward pressure, U.S. crude oil stockpiles were expected to have risen last week.
A preliminary Reuters poll released Monday showed that five analysts surveyed ahead of the official inventory data estimated, on average, an increase of about 1.5 million barrels for the week ending October 17.
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