Oil Traders Unconvinced About Trump’s India Plan

Regina Mayor, Global Head of Clients & Markets at KPMG International, discusses the outlook for oil prices and energy policy in the US.

Bearish signs are cropping up across the oil market after US President Donald Trump’s latest tariff threats fanned fears of an imminent oversupply.

West Texas Intermediate crude’s timespreads starting in February 2026 and several subsequent months have tipped into contango, a structure where nearby prices trade at a discount to longer-dated ones.

The repricing that began at the end of last week dashed hopes that the market might sidestep a widely expected glut just as fresh US tariff threats against China battered the demand outlook for the world’s two largest crude importers.

Crude markets are being pressured by rising output within and outside of the OPEC+ alliance, which agreed in early October to raise production quotas in a bid to reclaim market share.

Banks including Goldman Sachs Group Inc. and Morgan Stanley recently slashed oil-price forecasts for this year, and if New York-traded futures sustain declines in coming months US drillers could come under pressure. Headline WTI futures were slightly higher Monday after closing out last week at the lowest since May.

The bearish gloom also is visible in other corners of the market. The US benchmark contracts for the entire calendar year of 2026 were trading below $60 as of Friday, while the December-December spread, a favored trade among oil-focused hedge funds, sunk to its weakest since June.

Sentiment in WTI second-month options was close to most bearish in four months. Some of that has come from traders betting that near-term futures will weaken more than further out contracts, which tends to happen during periods of oversupply. Open interest in these wagers — known as calendar spread options — has ballooned over the past year as outright prices have bounced around in a range, sandwiched between geopolitical risks and OPEC+ supply increases.

Oil held steady near a five-month low amid mixed signals on US President Donald Trump’s push to stop India’s purchases of Russian crude.

West Texas Intermediate was little changed to trade near $58 a barrel after earlier rising by as much as 1.4%. India’s oil refiners said they expect to reduce — not stop — the purchase of Russian crude, a move that could squeeze global supply, following remarks by Trump that the South Asian nation would halt all buying. Still, the market is awaiting clarification on the situation from the government in New Delhi, which didn’t officially confirm or deny Trump’s remarks.

The development took some air out of the earlier rally, with traders newly assured that the halt to India’s imports of Moscow’s crude won’t be immediate. The South Asian country, along with neighbor China, has made the most of discounted Russian supplies accessible under a Group of Seven price cap mechanism that was designed to keep oil flowing while limiting Moscow’s access to funds for its war in Ukraine.

However, senior US officials have accused Indian businesses of profiteering and the purchases have been a main sticking point as New Delhi seeks to fast-track trade talks. Its trade secretary on Wednesday said his nation has the capacity to purchase an additional $15 billion of oil from the US.

Meanwhile, the UK slapped sanctions on Russia’s biggest oil producers, two Chinese energy firms and Indian refiner Nayara Energy Ltd. because of their handling of Russian fuel. Western nations are turning the screws on Russia’s energy sector in a bid to curb the flow of petrodollars to the Kremlin and limit President Vladimir Putin’s ability to finance the war in Ukraine.

Crude has fallen this month as increased trade tensions between the US and China raised concerns about demand in the two biggest crude consumers, and as major trading houses said a long-anticipated oversupply is already starting to emerge.

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