Oil prices are on track for a second consecutive weekly loss on Friday, pressured by escalating US-China trade tensions, rising global oil inventories, and growing expectations of higher inflation, while US President Donald Trump's decision to suspend tariffs on certain trade partners for 90 days, coupled with his openness to potential compromise with China, has tempered further declines.
The international benchmark Brent crude traded at $63.10 per barrel at 12.01 p.m. local time (0901 GMT), marking a decline of around 4% from last week's closing price of $65.74.
Similarly, the American benchmark West Texas Intermediate (WTI) was trading at $59.78 per barrel, down approximately 3.7% from last Friday's closing level of $62.10.
Trump’s announcement of a 10% tariff on imports from various trading partners, made during 'liberation day,' stoked fears of a deeper global trade war and led to expectations of curtailed oil demand. Brent crude saw a near 9% drop in the first week of April following the US administration's proposed 34% tariff on Chinese imports. In retaliation, China announced reciprocal tariffs on US goods at the same rate, escalating the trade standoff.
The second week of April further intensified concerns when Trump warned that a 50% tariff would be levied if China did not retract its 34% retaliatory tariffs, bringing the oil market to a tipping point. As a result, Brent crude fell below $65 for the first time since August 2021. On that day, WTI also dropped 2.1%, closing at $60.80 per barrel.
On April 8, China’s Commerce Ministry vowed decisive countermeasures in response to the new US tariffs, adding pressure to oil prices. The next day, the US administration confirmed that the additional 50% tariff on Chinese goods would take effect on April 9, further exacerbating price declines. Brent crude plunged 5% to $61.36 per barrel, its lowest closing level since March 2021, while WTI dropped 4.8%, settling at $57.90.
Oil prices continued to slide on April 9 amid the ongoing tariff battle and expectations that OPEC+ would proceed with its planned production increase. Brent crude reached $58.22 per barrel, marking its lowest level since February 2021.
However, a sharp rebound occurred later that day after Trump confirmed that while tariffs on Chinese goods would rise to 125%, those on other trade partners would remain frozen for 90 days. Brent crude closed the session up 6.7% at $65.47 per barrel.
The White House later clarified that the tariff hike would bring total duties on China to 145% when including the tariffs imposed due to the fentanyl crisis. In retaliation, China imposed its own 84% tariffs, effective Thursday.
Analysts noted that escalating trade tensions between Washington and Beijing were overshadowing optimism over trade negotiations and positive economic data from the US. Minutes from the latest Federal Reserve meeting revealed that policymakers now see increased inflation risks, raising concerns that a surprise uptick in inflation could prompt the Fed to pause rate cuts. Elevated interest rates typically dampen investor appetite for risk assets like oil, putting further downward pressure on prices.
In addition to the ongoing trade tensions, the US Energy Information Administration (EIA) has further dampened sentiment, projecting a rise in global oil inventories, which is adding pressure to prices.
According to the EIA's latest Short-Term Energy Outlook (STEO) released late Thursday, global oil inventories are expected to increase by an average of 600,000 barrels per day (bpd) in the second quarter of 2025, with a further rise of 700,000 bpd in the second half of the year. This upward trajectory in inventories is forecasted to continue into 2026, signaling weaker demand and exacerbating downward pressure on oil prices.
Despite these bearish outlooks, Trump’s remarks expressing a willingness to strike a deal with China provided a glimmer of hope for the market. His comments have raised optimism that a resolution could ease demand concerns, potentially limiting further declines in oil prices.
By Duygu Alhan
Anadolu Agency
energy@aa.com.tr