Oil falls as US-China trade tensions rattle nerves

Core Viewpoint - Oil prices have declined due to uncertainties surrounding U.S.-China trade tensions and weaker fundamentals highlighted by the International Energy Agency (IEA) [1][5] Group 1: Oil Price Movements - Brent crude futures fell by $1.01, or 1.6%, to $62.31 per barrel, while U.S. West Texas Intermediate crude decreased by 1.6%, or 95 cents, to $58.54, both nearing five-month lows [1] - In the previous session, Brent settled 0.9% higher and U.S. WTI closed up 1% [2] Group 2: Trade Tensions and Economic Factors - Ongoing assessments of the Middle East peace process, attacks on oil installations in Ukraine and Russia, and potential trade war escalation between the U.S. and China are influencing investor sentiment [2] - U.S. Treasury Secretary indicated President Trump is committed to meeting with Chinese President Xi Jinping to address tariff threats and export controls, despite recent escalations in trade tensions [3] - Beijing announced sanctions against five U.S.-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, and both countries will impose additional port fees on shipping firms [4] Group 3: IEA and OPEC+ Reports - The IEA raised its forecast for global oil supply growth due to OPEC+ production increases but lowered its demand growth forecast amid a challenging economic backdrop [5] - OPEC+ indicated that the oil market's supply shortfall is expected to shrink by 2026 as planned output increases are implemented [5] Group 4: Market Dynamics - The Brent oil futures 6-month spread is at its smallest premium since early May, while the WTI spread is at its narrowest since January 2024, indicating ample near-term supply [6] - Narrowing backwardation suggests that investors are earning less from selling oil in the spot market due to perceived sufficient near-term supply [6]