Oil prices slipped to their lowest levels in five months on Monday as growing concerns over a global supply glut overshadowed recent geopolitical risks. Both Brent crude and U.S. West Texas Intermediate (WTI) dropped more than $1 during the session, marking their weakest close since early May.
Traders’ sentiment has shifted from fears of under-supply to a new concern, too much oil on the market. The futures curve for both benchmarks has flipped into contango, a market structure where near-term contracts trade below later ones, signaling expectations of abundant supply.
According to analysts, this trend could lead to rising storage demand both onshore and offshore as traders look to profit from future price gains. “These glut fears are now descending onto the market,” said John Kilduff, partner at Again Capital. “We’ll start to see floating storage pick up and inland tanks get filled, this is a bearish narrative we haven’t seen in a while.”
Both benchmarks have now declined for three consecutive weeks, pressured further by the International Energy Agency’s projection of a widening supply surplus into 2026.
Meanwhile, trade tensions between the world’s two largest oil consumers, the United States and China are adding uncertainty. Both nations have imposed new port fees on cargo ships in a fresh round of tariff-related measures, a move analysts warn could disrupt global freight flows and dampen demand.
The World Trade Organization (WTO) has urged both powers to de-escalate, warning that a prolonged trade rift could shave up to 7% off global economic output over time.
Adding to the market’s bearish tone, U.S. energy firms recently increased rig counts for the first time in three weeks, suggesting potential growth in domestic output. Early data also shows U.S. crude stockpiles rose by roughly 1.5 million barrels last week, according to a Reuters survey.
Analysts from Gelber and Associates described the current market as a “classic shoulder-season mix” a period marked by refinery maintenance, weaker refining margins, and heightened focus on weekly inventory reports.
Despite temporary support from U.S. lobbying efforts to ease trade restrictions, the outlook remains clouded by geopolitical tension, particularly around Russian and Indian oil trade ties.
With contango deepening and demand growth softening, energy markets appear set for a volatile close to 2025.
