Oil Touches Multi-Year Lows Amid Supply Glut and Trade War Uncertainty

Oil prices have plummeted to multi-year lows, with concerns over excess supply and the ongoing US-China trade war weighing heavily on the market. As of February 2025, the wti crude oil futures price has fallen to $66.50 per barrel, its lowest level since 2021, while the Brent crude oil futures price has dropped to $71.20 per barrel, a level not seen since 2020. This article explores the factors contributing to the recent decline in oil prices and the potential consequences for global oil markets.



Excess Supply and Reduced Demand

The primary driver behind the recent decline in oil prices is the surplus of oil in the global market, coupled with reduced demand. According to the U.S. Energy Information Administration (EIA), global oil supply was on track to increase by 1.6 million barrels per day (b/d) in 2025, with non-OPEC+ producers accounting for the bulk of the increase. This increase in supply outpaced the growth in global oil demand, which was projected to average 1.1 million b/d in 2025. The EIA also noted that OPEC+ production cuts were gradually unwinding, further contributing to the excess supply in the market.

Trade War Uncertainty

The ongoing US-China trade war has added an additional layer of uncertainty to the global oil market. The escalating tensions between the world's two largest economies have raised concerns about potential disruptions to global supply chains and trade routes, which could impact oil prices. Moreover, the potential impact of US tariffs on Chinese oil imports, as well as the possibility of China retaliating with its own tariffs on US oil exports, has further exacerbated the uncertainty in the market.

Geopolitical Tensions and Market Sentiment

Geopolitical tensions, such as the Russia-Ukraine war and the US-China trade war, have also played a significant role in shaping market sentiment and oil prices. The Russia-Ukraine war, in particular, has led to a significant surge in crude oil prices, with the WTI crude oil futures price touching $133.460/barrel and the Brent crude oil futures price reaching $139.130/barrel on March 7, 2022. However, as the conflict has persisted, market participants have become increasingly concerned about the potential for a prolonged period of high energy prices, which could have negative implications for global economic growth and consumer spending.



Potential Consequences for Global Oil Prices

The combination of excess supply, reduced demand, and geopolitical tensions has created a challenging environment for global oil prices. As the market continues to grapple with these factors, there is a risk that prices could remain volatile and potentially decline further. However, it is essential to note that the global oil market is highly dynamic, and changes in supply and demand dynamics, as well as geopolitical developments, can quickly alter the market's trajectory.

In conclusion, the recent decline in oil prices can be attributed to a combination of excess supply, reduced demand, and geopolitical tensions, particularly the ongoing US-China trade war. As the market continues to navigate these challenges, it is crucial for investors to remain vigilant and adapt their strategies accordingly. By staying informed about the latest developments in the global oil market and maintaining a balanced perspective, investors can position themselves to capitalize on potential opportunities that may arise in the future.