Baghdad: Oil prices fell to their lowest levels since May after the United States threatened to impose new tariffs on China, in addition to easing geopolitical tensions in the Middle East. Fears of a global supply surplus also increased the pessimistic outlook in the markets. West Texas Intermediate crude fell 4.2% to settle below $59 a barrel, its lowest daily level since May, while Brent crude for December settlement fell 3.8% to $62.73 a barrel.

According to National Iraqi News Agency, the decline came after US President Donald Trump said he saw “no reason” to meet with his Chinese counterpart, Xi Jinping, and threatened to impose a “huge increase” in tariffs on goods imported from China. These statements reignited fears that a new trade war between the world’s two largest economies would hurt oil consumption and undermine risk appetite in markets, sending stocks tumbling.

Oil markets are heading toward a significant oversupply due to rising production from within and outside the OPEC+ alliance, followin
g the alliance’s agreement over the weekend to raise production quotas to regain market share. Although the overall market sentiment remains negative, investors’ views differ on how bleak the outlook is, according to Citigroup’s client position summary.

Friday’s drop in oil prices was likely also influenced by what are known as “gamma effects,” as existing options positions are concentrated at $60 per barrel, the level that represents the largest concentration of short positions over the next year, with approximately 109,000 open investment positions. This concentration makes price movements more volatile, as futures fluctuations around this level may lead traders to carry out additional hedging operations through selling, which would exacerbate pressure on prices if the decline continues.