Oil prices reversed early gains and fell on Tuesday amid uncertainty about trade tensions between the U.S. and China, the world’s top two economies, and as the International Energy Agency (IEA) flagged weaker fundamentals.

Brent crude futures fell $1.01, or 1.6%, to $62.31 a barrel by 0817 GMT, while U.S. West Texas Intermediate crude was also down 1.6%, or 95 cents, at $58.54. Both contracts were near a five-month low.

In the previous session, Brent settled 0.9% higher, and U.S. WTI closed up 1%.

“Investors are still assessing … the potential consequences of the Middle East peace process, the ongoing attacks on Ukrainian and Russian oil installations, and the possibility of reigniting the trade war between the world’s two economic behemoths,” PVM Oil analyst Tamas Varga said.

U.S. Treasury Secretary Scott Bessent said on Monday that President Donald Trump remains committed to meeting Chinese President Xi Jinping in South Korea this month, as both countries try to defuse tension over tariff threats and export controls.

However, developments last week, such as Beijing’s expanded export controls on rare earths and Trump’s threats of 100% tariffs and software export curbs from November 1, have weighed on sentiment.

On Tuesday, Beijing also announced sanctions against five U.S.-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, while the U.S. and China will begin charging additional port fees on ocean shipping firms that move everything from holiday toys to crude oil.

Meanwhile, the IEA in its monthly report on Tuesday raised its forecast for global oil supply growth this year following the OPEC+ group’s decision to hike production, and also lowered its demand growth forecast, citing a more challenging economic backdrop.

In its monthly report on Monday, the Organization of the Petroleum Exporting Countries, and allies including Russia, said the oil market’s supply shortfall would shrink in 2026, as the wider OPEC+ alliance proceeds with planned output increases.

The Brent oil futures 6-month spread was trading at its smallest premium (LCOc1-LCOc7) since early May, while the WTI spread (CLc1-CLc7) was at its narrowest since January 2024.

Narrowing backwardation, the market term for immediate deliveries fetching a premium over later deliveries, suggests investors are making less money selling their oil in the spot market because near-term supply is perceived to be ample.
Source: Reuters