Oil Falls 1.5% on US-China Trade Tensions and IEA Glut Warning

Oil prices dropped about 1.5% on Tuesday as renewed U.S.-China trade frictions and the IEA’s forecast of a major 2026 oil glut pressured markets. Brent crude settled at $62.39 per barrel and WTI at $58.70, both hitting five-month lows. The IEA projected a surplus of up to 4 million bpd next year, while OPEC offered a less bearish view, expecting a smaller shortfall as it raises output. Analysts said escalating trade tensions could weigh on China’s economy and dampen oil demand. The market’s backwardation narrowed sharply, signaling expectations of ample near-term supply and reduced spot market profits for traders.

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US-China Port Fee Battle Escalates Maritime Trade War

The U.S. and China have begun imposing reciprocal port fees on each other’s ships, escalating tensions that now extend deep into global maritime trade. China is charging U.S.-owned, operated, built, or flagged vessels while exempting Chinese-built ones, mirroring U.S. levies designed to counter Beijing’s dominance in shipbuilding and logistics. Analysts estimate the U.S. fees could cost China’s COSCO nearly half of the projected $3.2 billion in 2026, with 13% of crude tankers and 11% of container ships globally affected. Beijing also sanctioned five U.S.-linked Hanwha Ocean subsidiaries and launched an investigation into U.S. trade probes, while Hanwha’s shares fell 6%. The standoff, which includes Trump’s threat of 100% tariffs and new export controls, marks a shift as shipping becomes a direct instrument of geopolitical strategy.

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IEA Warns of Major Oil Glut in 2026 as Supply Outpaces Demand

The International Energy Agency (IEA) forecasts a massive oil surplus of up to 4 million bpd in 2026, equal to nearly 4% of global demand, due to rising OPEC+ and non-OPEC output combined with weak consumption growth. The agency raised its supply growth outlook to 2.4 million bpd next year while cutting demand growth to just 700,000 bpd, citing economic headwinds and accelerating transport electrification. September’s global oil supply was 5.6 million bpd higher year-on-year, with OPEC+ contributing most of the increase and seaborne oil volumes surging by 102 million barrels— the largest rise since the pandemic. Oil prices have fallen, with Brent crude near $62 a barrel, reflecting growing glut concerns. The IEA’s view contrasts sharply with OPEC’s, which expects stronger demand and balanced markets in 2026.

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Oil Trading Giants Warn of Emerging Surplus and Near-Term Price Pressure

Global commodity traders say a long-expected oil surplus is now materializing, likely pushing prices lower in the near term. Brent crude has fallen 11% since late last month as OPEC+, along with non-OPEC producers like Guyana, Norway, and Brazil, add supply to an already ample market. Vitol CEO Russell Hardy expects prices to average around $60 per barrel next year, while Trafigura and Gunvor executives anticipate further short-term declines before a potential recovery. The International Energy Agency projects a 4 million bpd surplus in 2026, larger than previously forecast, driven by rising output and sluggish demand. Traders note some mitigating factors, including potential disruptions in Venezuela and Iran, full refinery utilization, and the impact of U.S.-China trade tensions, which may temper the bearish outlook.

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European Airline CEOs Urge Greater EU Support for Green Fuel Transition

Europe’s top airline executives are urging the EU to boost support and subsidies for sustainable aviation fuel (SAF) production, saying supply remains far below mandated levels. The EU’s 2% SAF blending requirement, which will rise to 6% by 2030, has exposed shortages and high costs, with SAF priced three to five times higher than regular jet fuel. IAG CEO Luis Gallego said, “We have mandates but we don’t have SAF,” calling for a functional market framework. The CEOs of Ryanair, easyJet, Air France-KLM, Lufthansa, and IAG jointly backed the appeal through the Airlines for Europe group. EasyJet’s Kenton Jarvis added that mandates wouldn’t be necessary if SAF were competitively priced, while IATA’s Willie Walsh accused oil firms of imposing excessive SAF surcharges.