Oil prices retreated in Asian trading as investors weighed the geopolitical fallout from U.S. President Donald Trump's push to annex Greenland, a semi-autonomous Danish territory. This move has sparked global market jitters and raised concerns over the stability of the U.S.–European Union alliance. Oil prices fell, with expiring contracts dropping 1.2% to $64.16 per barrel, and WTI crude futures slipping 1% to $59.75 per barrel, despite a previous session's 1.5% gain driven by positive Chinese growth data.

Trump's administration has threatened 10% tariffs on imports from eight European nations over the Greenland dispute, escalating tensions ahead of his scheduled address at the World Economic Forum in Davos. European officials have strongly opposed these threats, increasing the risk of a broader trade confrontation that could weigh on economic growth and oil demand. Markets are also awaiting the IEA’s monthly oil market report, expected to point to a significant supply glut, which could further pressure crude prices.

The IEA is anticipated to forecast that global oil supply will exceed demand growth this year, reinforcing oversupply concerns. Additionally, OPEC+ producer Kazakhstan halted output at its Tengiz and Korolev oilfields due to power distribution problems, providing limited support to prices. The shutdown, which may last seven to ten days, underscores the ongoing volatility in the oil market and the potential impact of geopolitical tensions on supply and demand dynamics.