Oil slides on weak demand outlook, rising inventories

October 20, 2025 (MLN): Oil prices extended their decline on Monday as escalating trade tensions between the United States and China, coupled with mounting concerns over a growing supply glut, weighed heavily on global energy markets.

Brent crude futures went up by $0.43, or 0.70%, to $60.86 per barrel.

West Texas Intermediate (WTI) crude futures decreased by $0.49, or 0.85%, to $57.05 per barrel by [12:20 pm] PST.

The renewed trade dispute between the world’s two largest economies has clouded the outlook for global energy demand. Washington’s recent decision to reimpose tariffs on Chinese imports along with sanctions targeting key commodities, including Chinese cooking oil has sparked fears of a slowdown in industrial activity.

Analysts warn that the economic strain on both nations could dampen fuel consumption across manufacturing and transportation sectors, further depressing global oil demand.

Market strategists say the revived trade hostilities have injected fresh uncertainty into the global economy, undermining investor confidence in commodity markets.

The World Trade Organization (WTO) has urged both sides to de-escalate, warning that a prolonged rift could slash long-term global economic growth by up to 7%.

Adding to the bearish sentiment are concerns over an expanding supply surplus. The International Energy Agency (IEA) has projected a record oil glut of nearly 4 million barrels per day (bpd) by 2026 equivalent to roughly 4% of global demand.

The surge is being driven by rising production from OPEC+ members and non-OPEC producers, even as demand growth remains sluggish. The latest IEA outlook suggests that this imbalance will continue to exert downward pressure on prices.

Data from the U.S. Energy Information Administration (EIA) revealed that U.S. commercial crude inventories climbed to a five-week high of 423.8m barrels as of October 10, marking a 0.8% increase year-on-year.

When including barrels held in the Strategic Petroleum Reserve, total inventories reached a four-month peak, stressing persistent oversupply concerns. Although gasoline and distillate fuel stocks dipped slightly, the overall trend remains bearish for crude markets.

Despite some easing in geopolitical tensions following plans for an upcoming summit between U.S. President Donald Trump and Russian President Vladimir Putin to discuss the Ukraine conflict, oil prices have yet to find stable footing.

Analysts note that while reduced geopolitical risk may lower the traditional price premium, it also introduces new uncertainties about future global energy supply dynamics.

In a bid to bring more transparency and stability to the market, OPEC has initiated a review of member nations’ production capacities using independent consultancy assessments instead of self-reported data.

The move comes ahead of the 2026 quota negotiations and is part of OPEC’s broader strategy to recalibrate supply amid growing pressure to maintain price stability.

Bank of America analysts expect oil prices to find a potential floor near $55 per barrel, noting that some investors may view current levels as attractive for long term positioning.

However, the bank cautions that prices are likely to remain below $60 in the near term until there is a meaningful improvement in supply-demand fundamentals and a reduction in geopolitical uncertainty.

Copyright Mettis Link News