Oil prices dip amid U.S. China trade uncertainty, supply risks

October 21, 2025 (MLN): Oil prices extended their decline on Tuesday as renewed uncertainty over global trade and supply dynamics weighed on market sentiment. The drop came despite U.S. President Donald Trump expressing optimism about securing a “fair and strong” trade deal with Chinese President Xi Jinping ahead of their scheduled meeting in South Korea next week.

Brent crude futures went up by $0.15, or 0.25%, to $61.16 per barrel.

West Texas Intermediate (WTI) crude futures decreased by $0.08, or 0.14%, to $57.60 per barrel by [11:30 pm] PST.

“I think we’ll end up with a very strong trade deal. Both of us will be happy,” Trump said on Monday. However, key disputes over tariffs, technology transfers, and market access remain unresolved, keeping traders cautious about near-term demand prospects.

Energy consultancy Ritterbusch and Associates noted that crude’s short-term outlook remains bearish, with a preference for “selling into price advances rather than buying pullbacks.” The firm added that while geopolitical risks could occasionally support prices, overall oil balances are turning “increasingly negative with each passing week.”

A preliminary Reuters poll suggested that U.S. crude inventories likely rose last week, ahead of official data from the American Petroleum Institute (API) and the Energy Information Administration (EIA). Rising stockpiles have added to bearish sentiment as traders brace for signs of oversupply.

Meanwhile, disruptions in Russia underscored ongoing geopolitical volatility. Rosneft’s Novokuibyshevsk refinery in the Volga region suspended primary crude processing after a drone attack on Sunday. Separately, a strike on the Orenburg gas facility forced neighboring Kazakhstan to reduce output at its Karachaganak oil and gas condensate field by 25% to 30%.

Uncertainty surrounding Russian oil supply remains elevated, as President Trump warned India of “massive” tariffs if it continues purchasing Russian crude. India has emerged as the largest buyer of discounted Russian oil since Western sanctions were imposed on Moscow.

Market weakness was further compounded by a downbeat forecast from the International Energy Agency (IEA), which last week projected a potential global oil surplus of nearly 4 million barrels per day by 2026. The agency cited rising output from OPEC+ members and non-OPEC producers alongside sluggish demand recovery as key factors contributing to the anticipated glut.

The combination of trade tensions, growing inventories, and a looming oversupply outlook has kept crude markets under pressure, with analysts expecting volatility to persist in the near term.

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