Oil prices dropped by more than $1 to around $58.00 on Tuesday, driven by renewed US-China trade war fears. The US and China announced increased taxes on cargo vessels, impacting trade expectations and raising concerns about an oil surplus.

Rising Crude Output and Trade Uncertainties

The benchmark West Texas Intermediate (WTI) Oil price is hovering above the five-month low of $57.90. Despite hopes that the US and China might ease tensions, both countries have maintained hardline positions. President Trump is set to meet Xi Jinping later in October.

Meanwhile, crude output is projected to rise by an additional 137,000 barrels per day in November. Although this increase is smaller than anticipated, it keeps the potential for an oil surplus high amid continuous trade uncertainties.

WTI Oil, also known as West Texas Intermediate, is a type of high-quality crude oil that is easily refined. It is sourced in the United States and acts as a market benchmark. Factors influencing WTI prices include supply and demand dynamics, political instability, OPEC’s decisions, and the value of the US Dollar.

The weekly API and EIA reports impact WTI Oil prices by highlighting changes in inventories, which can indicate supply and demand shifts. OPEC often influences prices by adjusting production quotas, affecting supply levels.

Impact of Trade Anxiety on Oil Prices

We are seeing WTI crude struggling around the $58 mark today, October 14th, 2025, after a sharp drop of over $1. The new taxes on cargo vessels between the US and China have directly impacted sentiment, creating fears of a significant slowdown in global trade. This move puts the planned late-October meeting between the two leaders in serious doubt.

This trade anxiety adds to a weakening global economic picture. The International Monetary Fund’s report from last week revised global growth forecasts downward for the fourth straight quarter, highlighting trade friction as a primary concern. We are seeing this reflected in recent purchasing managers’ index (PMI) data from both Europe and Asia, which have consistently missed expectations.

On the supply side, the market is bracing for this afternoon’s API inventory report, which follows a surprise build of 2.1 million barrels in last week’s more closely-watched EIA data. Another build would confirm fears of a supply glut, especially with producers planning to increase output next month. This makes tomorrow’s EIA report a critical data point for the week.

This situation is reminiscent of the market action we saw during the 2018-2019 trade war, where price swings became sharp and unpredictable. Back then, traders who bought put options to protect against downside risk profited from similar price drops driven by negative headlines. The current environment suggests that owning some downside protection through puts could be a prudent strategy.

With prices falling, volatility is likely to increase in the coming weeks. We should look to options strategies, like straddles or strangles, to trade this expected rise in price movement. It is important to watch for any statements from OPEC+, as whispers of an emergency meeting could quickly put a floor under the price if it dips toward the $55 level.

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