Oil News: IEA Warns of 4M bpd Surplus—Oil Outlook Turns Sharply Bearish

Oil Prices Tumble Below $58 as Trade Strains and IEA Surplus Warning Deepen Bear Case

Light crude oil futures slid more than 2% on Tuesday, breaking below last week’s low of $58.22 and testing levels not seen since early June. Heavy selling pushed prices to $57.68, with the May 30 bottom at $55.74 now in sight as the next key support. The move extends a sharp bearish trend, as WTI continues to trade below both the 50-day and 200-day moving averages—$62.63 and $62.96, respectively—cementing downside momentum.

On the upside, minor resistance comes in at the $59.91 Fibonacci level. A recovery above this could slow the selling, but momentum remains firmly bearish as the 50-day average trades below the 200-day, reinforcing technical pressure.

At 14:39 GMT, Light Crude Oil Futures are trading $58.31, down $1.18 or -1.98%.

US-China Tensions and Sanctions Hit Market Sentiment

Sentiment was further rattled by renewed U.S.-China trade conflict. Beijing issued sanctions against five U.S.-linked South Korean shipbuilder subsidiaries, while both nations are moving to impose additional port fees on ocean shipping firms. These developments come after threats of 100% tariffs and tech export curbs from Washington, dampening risk appetite.

Though U.S. Treasury Secretary Scott Bessent noted that President Trump is still expected to meet with President Xi later this month, traders remain cautious. UBS analyst Giovanni Staunovo noted that the “risk-off mood” and escalating tariff threats are clouding the demand outlook.

IEA Projects 4 Million bpd Surplus in 2026, Warns of Sluggish Demand

The International Energy Agency (IEA) added to the bearish tone, forecasting a global supply surplus of up to 4 million barrels per day in 2026—nearly 4% of world demand. The agency also revised its 2025 demand growth forecast down to 710,000 bpd, citing a weak economic backdrop and faster adoption of transport electrification.

September data showed global oil supply surged 5.6 million bpd year-over-year, with OPEC+ responsible for 3.1 million bpd of that increase. Seaborne oil volumes also jumped by 102 million barrels last month, the largest build since the pandemic, driven by rising Middle East output.

OPEC Counters IEA, But Supply Build Narrows Forecast Gap

OPEC maintains a more constructive outlook, projecting 1.3 million bpd in demand growth this year and a slight acceleration in 2026. The group expects a balanced market next year, with a marginal 50,000 bpd deficit if current production levels hold. That view contrasts with IEA projections, but the forecast gap is narrowing as OPEC+ rapidly unwinds prior output cuts.

Bearish Outlook: Rising Supplies and Weak Demand Point Lower

With technical support breaking down, supply rising across OPEC+ and non-OPEC producers, and demand revisions trending lower, the market setup skews bearish.

nless geopolitical relief or a major demand catalyst emerges, traders should brace for a potential test of $55.74 in WTI. Narrowing backwardation and weakening spot premiums further validate a soft near-term oil prices forecast.

More Information in our Economic Calendar.