Oil prices poised for second weekly drop amid US-China trade tensions

Oil markets are heading for another weekly decline as ongoing trade tensions between the United States and China cast a long shadow over global demand forecasts. Despite a modest uptick in prices early Friday, crude remains on track to extend losses for a second straight week.

Brent crude edged up 14 cents to $63.47 a barrel in early trading, while U.S. West Texas Intermediate (WTI) rose to $60.21—both up 0.2%. Still, the weekly picture remains negative: Brent is down 3.2% this week, and WTI is set to fall 2.9%, following last week's sharp 11% slide for both benchmarks.

The broader concern for markets isn't just short-term volatility—it’s the potential for a prolonged slowdown in global trade. As the world’s two largest economies lock horns over tariffs, business leaders and policymakers are bracing for ripple effects that could dampen economic growth and reduce energy demand across sectors.

Analysts at BMI warn that oil prices are likely to stay under pressure as markets digest the implications of the trade dispute. “Investors are closely watching the state of negotiations between Washington and Beijing,” they noted in a Friday briefing, pointing to rising uncertainty and cautious sentiment in commodities markets.

That caution is echoed by ANZ’s senior commodity strategist Daniel Hynes, who said the prospect of slower global growth is a real threat to oil consumption. “If global GDP slips below 3%, we could see a 1% drop in oil demand,” he said.

Fueling the bearish sentiment, President Trump’s latest round of tariff hikes—raising duties on Chinese imports to 145%—has added a new layer of tension. While he had paused additional tariffs on other trading partners earlier in the week, China swiftly retaliated with fresh levies of its own, deepening the standoff.

The U.S. Energy Information Administration responded by cutting its global economic growth forecast and slashing its oil demand outlook for both this year and next. The agency also warned that sustained tariff friction could further erode oil prices.

Eyes are now turning to the upcoming OPEC+ meeting scheduled for May 5. According to BMI, the group’s stance on production levels could significantly sway market sentiment. "If OPEC signals any increase in output, we could see another wave of selling," analysts said.

Summary:

Oil prices are on course for a second weekly decline, pressured by escalating U.S.-China trade tensions and fears of slowing global growth. While prices rose slightly Friday, broader concerns about reduced demand and uncertain trade dynamics continue to weigh on the market. Upcoming decisions from OPEC+ could further shape the trajectory of crude prices in the weeks ahead.

FAQs: Oil Prices and Trade Tensions

Q1: Why are oil prices reacting to the US-China trade war?

Oil prices are highly sensitive to global economic trends. Trade tensions between major economies like the U.S. and China can slow global trade, reduce industrial output, and ultimately lower demand for oil.

Q2: How do tariffs affect oil markets?

Tariffs can disrupt supply chains, reduce consumer and business spending, and trigger economic slowdowns. This reduced activity often leads to lower energy consumption, which puts downward pressure on oil prices.

Q3: What’s the role of OPEC+ in stabilizing oil prices?

OPEC+ (which includes major oil producers like Saudi Arabia and Russia) often adjusts production levels to influence global oil supply. Decisions at upcoming meetings—such as increasing or cutting output—can significantly impact prices by either tightening or loosening supply.

Q4: Could this downturn in oil prices impact other industries?

Yes. Lower oil prices can benefit transportation, logistics, and manufacturing by reducing energy costs. However, it can also strain energy producers and economies reliant on oil exports, leading to broader market volatility.

Q5: Is a rebound in oil prices likely soon?

That depends on multiple factors—progress in trade negotiations, shifts in global demand forecasts, and OPEC+ decisions. Until there's more clarity, markets are expected to remain cautious and volatile.