After a sharp drop late last week when President Trump threatened a 100 % tariff on Chinese exports, oil prices had slumped to near five-month lows amid fear of demand contraction. A ceasefire in Gaza only added to downward pressure due to an easing of geopolitical risk.
The most recent reversal stems largely from positive sounds coming from Beijing and Washington over a potential trade war. Most notably, U.S. Treasury Secretary Scott Bessent confirmed that President Trump intends to meet President Xi Jinping at the upcoming APEC in South Korea.
Despite the modest rebound, structural risks remain significant. U.S. oil futures backwardation has cooled to a 20-month low, as the premium of nearest contracts over more distant months narrows – a hallmark of softening prompt tightness and growing oversupply fears.
OPEC’s latest monthly report, however, adjusted expectations. The organization now sees the 2026 supply shortfall as minor, roughly 50,000 bpd, as its increased output begins to alter the balance in markets.
China’s crude imports in September rose ~3.9 % year-on-year to around 47.25 million metric tons, hinting at resilience in refining runs or strategic stockpiling. That said, the demand environment remains uneven globally, and concerns linger that any renewed trade skirmishes could erode fuel consumption.
Credit: Oilprice.com
