Oil Falls As Trade War Tumult Cements Expectations Of Surplus

The IEA slashed its forecasts for oil demand this year by almost a third and predicted the oversupply will extend into 2026. (Image source: Bloomberg)

Oil edged lower as traders monitored the latest US moves in the tariff war amid mounting consensus the market will experience a persistent surplus.

West Texas Intermediate futures slipped to around $61 a barrel after the European Union and US made little progress during trade talks this week, and the Trump administration indicated that most of the tariffs imposed on the bloc will remain. The IEA slashed its forecasts for oil demand this year by almost a third and predicted the oversupply will extend into 2026.

Oil has dropped about $10 this month as the trade fight started by President Donald Trump stoked fears of a global recession that would hurt energy demand, especially in the US and China, the biggest crude consumers. Concerns about the growth outlook have led agencies to cut projections for oil usage and analysts to slash price forecasts, with the possibility of a glut amplified by OPEC+'s surprise decision to bring back output more quickly than expected.

The Organization of the Petroleum Exporting Countries already trimmed its outlook for consumption over the next two years by about 100,000 barrels a day, following a larger cut by the US Energy Information Administration last week. Energy Aspects Ltd. cut its annual oil-price forecast by $10 a barrel, saying a global recession is now all but certain.

“The 2025 oil market surplus is increasing,” HSBC Holdings Plc analysts including Kim Fustier wrote in a note. “The combination of weaker demand and accelerated output increases from OPEC+ suggests a larger 2025 surplus than we were forecasting a few months ago.”