Oil prices decline due to worries about an excess of supply
Concerns about a global glut and trade issues between the U.S. and China made oil prices drop by almost 2% on Monday. These worries were added to worries about an economic slowdown and lower energy demand.
Up 1.7%, Brent oil futures were at $60.23 a barrel at 13:12 GMT, while down 1.8%, U.S. West Texas Intermediate futures were at $56.51.
Traders’ worries about oil have changed from not having enough supply to having too much supply, as shown by the structure of the global benchmark Brent futures contract.
The Brent six-month spread shows that contracts for earlier loading are trading below those for later loading. This is called “contango,” and it makes traders want to store oil so they can sell it at a higher price when stocks are expected to have decreased.
Thursday was the first time since May that the Brent contango showed up again. It has gotten deeper, now at -56 cents, which is the deepest it has been since late 2023.
Both standards fell more than 2% last week, which was the third week in a row that they fell. This was partly because the International Energy Agency predicts that there will be too much oil on the market in 2026.
The head of the World Trade Organization said last week that she had asked the US and China to calm down on their trade disputes. She warned that if the world’s two biggest economies started to separate their economies, it could lower global output by 7% over time.
The world’s two biggest oil consumers have recently started a new trade war. To show their anger, they are charging more for port fees for ships moving goods between their countries. These actions could slow down the flow of goods around the world.
What might happen with Russia’s oil supply is still unknown. On Sunday, U.S. President Donald Trump warned India again that the U.S. would keep imposing “massive” taxes on India unless it stopped buying Russian oil.
It was the first time in three weeks that U.S. energy companies added rigs to the supply side, according to Baker Hughes (BKR.O), an energy services company.
