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Oil Extends Slide on China Demand Worries, Supply Risks, and Fading Geopolitical Premium

Crude prices fell for a third session on Monday, adding to last week’s losses as fragile demand signals from China and the prospect of higher OPEC+ supply outweighed a softer geopolitical risk premium.

  • Brent (Dec): $61.07/bbl (−0.4%)
  • WTI (Dec): $56.94/bbl (−0.4%)

Both benchmarks shed over 2% last week and are trading near five-month lows.

Demand Concerns Deepen After China’s Q3 Miss

Fresh data showed China’s GDP grew 4.8% y/y in Q3, the slowest pace in a year, reviving fears about a patchy post-pandemic recovery and tepid industrial fuel demand. With growth still leaning heavily on exports—and U.S.–China trade frictions simmering—markets remain doubtful that Beijing will deliver a durable, consumption-led upswing in oil demand.

Supply Narrative Tilts Bearish

A bearish monthly report from the International Energy Agency last week underscored weakening balances into 2026, warning that planned OPEC+ output increases could tip the market toward a supply overhang. Traders are positioning for looser fundamentals if alliance members maintain steady production growth into next year.

Geopolitics: Ceasefire Tempers Risk Premium

Prices also eased after Israel said a ceasefire with Hamas had resumed following weekend hostilities, with aid flows to Gaza set to restart. The development reinforced the recent compression of the Middle East risk premium, which had faded as markets priced out immediate escalation risks.

U.S.–China Tensions and India–Russia Angle

Heightened U.S.–China trade tensions have pressured crude in recent weeks, though some conciliatory remarks from U.S. officials offered limited support. Separately, U.S. President Donald Trump said Sunday that India’s Prime Minister Narendra Modi told him New Delhi would stop buying Russian oil—remarks India has not corroborated. India has been a pivotal buyer of discounted seaborne Russian barrels since 2022, and any material shift would ripple through crude trade flows and differentials.

The Setup: What to Watch

  • Macro: Additional China activity data and global PMIs for signs of demand stabilization.
  • U.S. inventories: API/EIA stock changes for confirmation of product demand trends.
  • OPEC+ signals: Any guidance on 2026 policy that could recalibrate supply expectations.
  • Geopolitics: Durability of the Israel–Hamas ceasefire and any wider regional spillovers.

Bottom line: With China demand doubts re-asserting, a softening geopolitical premium, and the risk of supply growth into 2026, near-term bias for crude remains to the downside unless inventories tighten or demand surprises to the upside.

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