Oil prices continued to decline during Asian deals on Wednesday, extending losses from the previous session as investors digested warnings from the International Energy Agency (IEA) about a potential supply glut in 2026 and escalating U.S.-China trade tensions that could weigh on global demand.
By 3:30 pm AEDT (4:30 am GMT), Brent crude futures fell 20 cents, or 0.3%, to US$62.19 per barrel, while U.S. West Texas Intermediate (WTI) futures slipped 14 cents, or 0.2%, to US$58.56 per barrel.
Both benchmarks closed at five-month lows in the prior session.
ANZ analyst noted: “Trade tensions remain elevated despite the Trump administration striking a more conciliatory tone and opening the door for China to walk back last week’s restrictions on rare earth exports.
"China placed limits on five U.S. entities linked to one of South Korea’s largest shipbuilders. Beijing also threatened further retaliatory measures on the shipping industry. This escalates a long-standing dispute with the US over maritime dominance.
"Major trading houses are also sounding a warning of lower prices. Ben Luckock, global head of oil at Trafigura warned that the onset of a long-awaited oil market surplus is just about here.”
Meanwhile, the IEA on Tuesday said the global oil market could face a surplus of up to 4 million barrels per day in 2026, exceeding its earlier projections.
The agency cited increased output from OPEC+ members and non-aligned producers, alongside subdued demand growth, as key contributors to the imbalance.
The outlook was further clouded by renewed trade friction between Washington and Beijing, the world’s two largest oil consumers. Both nations imposed new port fees on vessels carrying cargo between them, adding to transport costs and disrupting trade flows.
Tensions escalated after China announced a major expansion of rare earth export controls, prompting U.S. President Donald Trump to threaten 100% tariffs on Chinese imports and additional restrictions on software exports starting 1 November.
Market participants are also awaiting fresh data for signs of domestic demand. The American Petroleum Institute (API) will release its weekly inventory report on Wednesday, followed by the U.S. Energy Information Administration (EIA) report on Thursday.
Both updates were delayed by a day due to the Columbus Day/Indigenous Peoples' Day holiday.
