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    Home > Headlines > Oil settles down 1.5% on US-China trade tensions, IEA warning of glut
    Headlines

    Oil settles down 1.5% on US-China trade tensions, IEA warning of glut

    Published by Global Banking & Finance Review®

    Posted on October 14, 2025

    3 min read

    Last updated: January 21, 2026

    Oil settles down 1.5% on US-China trade tensions, IEA warning of glut - Headlines news and analysis from Global Banking & Finance Review
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    Tags:oil and gasfinancial marketsInternational trade

    Quick Summary

    Oil prices dropped 1.5% as US-China trade tensions and an IEA supply glut warning impacted the market, with Brent and WTI hitting five-month lows.

    Table of Contents

    • Impact of Trade Tensions on Oil Prices
    • IEA's Supply Glut Warning
    • Market Reactions and Analyst Insights
    • Short-Term vs Long-Term Outlook
    • Recent Developments in US-China Relations

    Oil Prices Drop 1.5% Amid US-China Trade Tensions and IEA Supply Warning

    Impact of Trade Tensions on Oil Prices

    By Arathy Somasekhar

    IEA's Supply Glut Warning

    HOUSTON (Reuters) -Oil prices fell on Tuesday, settling 1.5% lower as the International Energy Agency warned of a huge supply glut in 2026, and as trade tensions persisted between the U.S. and China, the world's two biggest economies.

    Market Reactions and Analyst Insights

    Brent crude futures fell 93 cents, or 1.5%, to settle at $62.39 a barrel. U.S. West Texas Intermediate crude was down 1.3%, or 79 cents, at $58.70. Both contracts were at a five-month low.

    Short-Term vs Long-Term Outlook

    In the previous session, Brent settled 0.9% higher, and U.S. WTI closed up 1%.

    Recent Developments in US-China Relations

    The world oil market faces an even bigger surplus next year of as much as 4 million barrels per day as OPEC+ producers and rivals lift output and demand remains sluggish, the International Energy Agency predicted.

    On Monday, a monthly report by he Organization of the Petroleum Exporting Countries, and allies including Russia was less bearish than the IEA's view. It said the oil market's supply shortfall would shrink in 2026, as the wider OPEC+ alliance proceeds with planned output increases. 

    However, executives at oil majors and top trading houses said they expect global oil market to tighten in the medium to longer term, recovering from short-term weakness.

    "The latest tensions between the U.S. and China will also be a pressure point on crude as China’s economy could be in question if tensions stay elevated," said Dennis Kissler, senior vice president of trading at BOK Financial.

    UBS analyst Giovanni Staunovo said a risk-off mood had taken hold as trade tensions weigh on sentiment and the IEA report was bearish.

    U.S. Treasury Secretary Scott Bessent said on Monday that President Donald Trump remained committed to meeting Chinese President Xi Jinping in South Korea this month. Washington and Beijing seek to defuse tensions over tariff threats and export controls.

    Last week, however, China expanded export controls on rare earths and Trump threatened 100% tariffs and software export curbs from November 1.

    Beijing also announced sanctions on Tuesday against five U.S.-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, while the U.S. and China will begin charging additional port fees on ocean shipping firms.

    The Brent oil futures six-month spread traded at its smallest premium since early May, while the WTI spread was at its narrowest since January 2024.

    Narrowing backwardation, the market term for immediate deliveries fetching a premium over later deliveries, suggests traders are making less money from selling oil in the spot market because near-term supply is perceived to be ample.

    (Additional reporting by Enes Tunagur in London, Anjana Anil in Bengaluru and Emily Chow in Singapore; Editing by Susan Fenton, Barbara Lewis, Sharon Singleton, Frances Kerry and David Gregorio)

    Key Takeaways

    • •Oil prices fell 1.5% amid US-China trade tensions.
    • •IEA warns of a potential supply glut in 2026.
    • •Brent and WTI crude futures hit a five-month low.
    • •OPEC+ plans to increase output despite sluggish demand.
    • •US-China tensions could impact China's economic outlook.

    Frequently Asked Questions about Oil settles down 1.5% on US-China trade tensions, IEA warning of glut

    1What is a supply glut?

    A supply glut occurs when the supply of a product exceeds its demand, leading to lower prices. In the oil market, a glut can result from increased production or decreased consumption.

    2What are Brent crude futures?

    Brent crude futures are contracts for the future delivery of Brent crude oil, a major trading classification of crude oil. They are used as a benchmark for oil prices globally.

    3What is West Texas Intermediate (WTI)?

    West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from the U.S. and is known for its high quality.

    4What is OPEC+?

    OPEC+ is a group of oil-producing countries that includes the Organization of the Petroleum Exporting Countries (OPEC) and other major producers like Russia. They coordinate oil production to influence prices.

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