The oil prices fell on Thursday, as tensions escalated between China and the US.
Trump has imposed reciprocal tariffs against most of his trading partners, for 90 days.
The oil market sentiment has soured since Trump increased tariffs against China from 104% to 125%.
Brent crude at the Intercontinental Exchange is down 1.2% to $64.72 per barrel.
WTI rose to $60 per barrel on Wednesday in an upsurge after Trump’s announcement of a pause in the reciprocal tariffs. WTI and Brent prices had fallen to their lowest level since February 2021 earlier in the session.
In a recent note, analysts at ING Group said:
Even though the market’s uncertainty has been reduced, it is still high.
China demand
Analysts at ING said that “this uncertainty will still drag down global growth which in turn is a major concern for the oil demand.”
The market has been plagued by concerns about the falling demand for crude in China over the past year.
China remains the largest oil importer in the world. Crude oil shipments have been low this year compared to last.
It is expected that the extremely high oil tariffs will further decrease demand for oil in Asia’s giant.
The slide is a result of weakened consumption in China as well as growing fears about the Trump tariffs causing a global slowdown.
Morrison Adds:
A game this young is not going to be a contest of clinging on. Investors must be prepared for further market volatility and uncertainty.
China announced a tariff of 84% on US products, and an import tax that will take effect Thursday.
Market better supplied
Oil prices are expected to continue in the negative after initial optimism about Trump suspending reciprocal tariffs for 90 days on the majority of countries fades.
The Organization of Petroleum Exporting Countries (OPEC) and its allies reported a 411,000 barrels daily increase last week. This added to the concerns over the falling demand.
In April, the group will increase its output by 135,000 barrels per day. This is the first phase of unwinding the voluntary production reductions that have been in place for many years. Market expectations were for OPEC’s output to increase by a comparable amount in May.
According to the International Energy Agency, the oversupply on the market will be approximately 600,000 barrels a day by 2025. Experts said that the current trade tensions will likely cause the market to experience an even greater oversupply.
Analysts at ING said that the ICE Brent Forward Curve signals a more well-supplied market for oil, at least in certain parts.
The curve has moved from backwardation to contango starting with the contract for January 2026.
According to ING, the Brent Dec-25-26 Spread’s move into contango combined with other indicators suggests the market will be more balanced in the future.
Morrison said that “on the positive side, Trump has always stated his desire to bring down energy prices, and it’s been achieved.”
Keystone Pipeline
Analysts at ANZ Research said that the Keystone Pipeline declared force majeure for scheduled oil shipments, which has somewhat supported prices.
They also pointed out downside risks, due to the signs of a surge in supply by OPEC.
After an oil spill near Fort Ransom in North Dakota on Tuesday, the Keystone pipeline operated by TC Energy, formerly TransCanada, which connects Canada and the US, remained shut Wednesday.
The company has begun evaluating its plans to return to service.
On Wednesday, the Caspian Pipeline Consortium reported that oil had once again been loaded at one of two Black Sea dockings previously closed.
The court was able to lift the restrictions placed by a Russian regulator on a facility owned by an organization backed from Western countries.
The Energy Information Administration also reported an increase of 2.6 million barrels in US crude stocks during the week ended April 4.
This was nearly twice the 1.4m barrels increase that was predicted in a Reuters survey.
The post Oil Market sheds Tariff Pause Optimism as Weak Demand and Oversupply Drag Prices may be updated as new developments unfold.
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