Oil prices experienced a significant decline of nearly 3% on Thursday, driven by escalating fears surrounding the U.S.-China trade war and the potential for a recession. This drop overshadowed the temporary relief that had been felt after President Donald Trump announced a 90-day pause on sweeping tariffs affecting most nations. As of 0857 GMT, Brent futures decreased by $1.94, or 2.96%, settling at $63.54 a barrel, while U.S. West Texas Intermediate crude futures fell $1.88, or 3.02%, to $60.47. This retreat followed a day of volatility on Wednesday, when crude benchmarks had plummeted by as much as 7% but ultimately closed around 4% higher after Trump’s announcement.
Nevertheless, the pause in tariffs did not apply to China, as Trump ramped up tariffs on Chinese imports from 104% to 125%. This action intensified the already tense trade situation with China, a major consumer of crude oil. Ashley Kelty, an analyst at Panmure Liberum, noted that the ongoing trade war created significant uncertainty regarding oil demand growth. He emphasized the risks of declining prices, stating that volatility remains high and predicting difficulty in determining the near-term trajectory of oil prices.
In response, China announced an additional 84% import levy on U.S. goods, further complicating the situation. Despite the temporary reprieve, Ole Hansen from Saxo Bank pointed out that the global economy is still confronting severe trade barriers reminiscent of the 1930s. Analysts from ANZ Research expressed concerns that a deeper global economic slowdown could drive prices lower, potentially setting support levels for oil around $50 per barrel. Investors are also monitoring mixed supply signals.
The Keystone oil pipeline from Canada to the U.S. is still down due to an oil spill, while the Caspian Pipeline Consortium has resumed operations following the lifting of restrictions. Additionally, the U.S. saw a rise in crude inventories by 2.6 million barrels, a figure nearly double the expected increase.