WASHINGTON (dpa-AFX) - Crude oil pulled back sharply from yesterday's gains on Tuesday as renewed trade tensions between the U.S. and China over rare earth mineral exports have heightened.
An International Energy Agency report predicting low demand for the months ahead also weighed on oil prices.
WTI Crude Oil for November delivery was last seen trading down by $0.70 (or 1.18%) at $58.79 per barrel.
In its report released today, the International Energy Agency has predicted that the oil market is facing a surplus next year of nearly 4 million barrels per day against the backdrop of an output increase by OPEC+ versus a sluggish demand forecast.
Today's report also stated that global oil supply in September was up by 5.6 million barrels per day from a year ago, with OPEC+ accounting for 3.1 million bpd of the increase.
The agency also lowered its demand growth estimates to around 700,000 bpd for 2025 and 2026. In the agency's view, supply is accelerating faster than demand.
Today's IEA report contradicts yesterday's OPEC alliance's monthly report, which argued for the world economy to continue to show solid growth and maintained its forecasts for global oil demand to rise by 1.3 million barrels per day this year.
The bilateral trade tensions that started after U.S. President Donald Trump's threatened new 100% tariffs on Chinese exports to the U.S. (set to take effect from November 1) last weekend has created jitters in the market. The clash between the world's two largest economic majors and consumers started after Trump learned about the export curbing measures by China for its rare earth minerals.
Frustrated Trump also went on to state that there was no point in meeting Chinese President Xi Jinping this month in a summit in South Korea as previously planned.
Yesterday, though, the U.S. Treasury Secretary Scott Bessent stated that the meeting could likely happen.
Both sides have levied special port fees on each other's shipping vessels, entering their ports.
Concerns about the global economy have risen due to the effect of tariffs as well as due to the implications of rare earth supply disruption to various global companies.
Meanwhile, the Middle East is seeing actual peace returning after many long years.
The first phase of the Gaza Peace Plan, proposed by Trump, has ended seamlessly, with Israel and Palestinian Hamas militant groups exchanging all the remaining prisoners and hostages.
With supply side disruption concerns in the gulf waning, risks of Houthi attacks on vessels transiting the Red Sea also stands eliminated. These developments have taken away the risk premium on oil prices.
In the ongoing Russia-Ukraine war, drones launched by Ukraine's SBU intelligence service and military special forces hit at least five reservoirs in Russia. An oil terminal at Feodosia in the Russian-occupied Crimean Peninsula was burning on Monday. Ukraine has launched more than 30 strikes on Russian energy sites since the beginning of August.
In Kharkiv, Ukraine's second-largest city, a Russian attack with guided bombs yesterday knocked out power supply to 30,000 consumers as three bombs damaged a hospital before hitting power transmission lines.
Trump has stated that he is considering Ukraine's request for American Tomahawk missiles to which Russia has strongly expressed its objection and displeasure.
Escalating tensions in Russia causing supply concerns has halted oil from sliding further.
In the U.S., the government shutdown has entered day number 14.
With no resolution to the impasse in sight, 750,000 federal employees are now left without pay and some without any chance of being reinstated as Trump has commenced mass layoffs to cut down on spending.
The U.S. economy, already under stress due to tariffs, is now loaded more with shutdown pressure. The sluggishness is weighing on the oil prices.
Traders estimate that in the short-term, oil price will respond in proportion to the developments in the Sino-U.S. ties, U.S. shutdown, and Fed rate cuts.
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