West Texas Intermediate (WTI) crude traded near $58.10 during the Asian session on Wednesday, after posting more than 1.5% losses in the previous session. Oil prices remained under pressure following the International Energy Agency (IEA) warning of a potential global supply surplus in 2026.
Oversupply concerns weigh on crude
The IEA reported on Tuesday that the global oil market could face a surplus of up to 4 million barrels per day next year, exceeding earlier projections. Increased output from OPEC+ members and other producers, coupled with sluggish demand, has raised concerns about a prolonged supply glut, which continues to cap gains in WTI prices.
US-China trade tensions add downward pressure
Renewed US-China trade tensions have further dampened crude oil sentiment. President Donald Trump criticized China’s protectionist policies, threatening targeted trade restrictions if Beijing implements new rare earth export controls and higher port fees for foreign container ships. China retaliated with sanctions on five US-linked subsidiaries of South Korean shipbuilder Hanwha Ocean, escalating fears that trade friction could slow global oil demand.
Fed rate cut expectations offer limited support
Despite these headwinds, oil prices may find some support from growing expectations of further US Federal Reserve (Fed) rate cuts in 2025. Lower borrowing costs could stimulate economic activity in the United States, the world’s largest oil consumer, providing underlying support for crude.
Fed Chair Jerome Powell recently reiterated that the central bank is on track for another 25-basis-point rate cut this month, citing weak hiring as a growing risk. According to the CME FedWatch Tool, markets now assign a 94% probability of an October rate cut and a 93% chance of another in December, which could help cushion further losses in WTI.
