Brent crude oil futures dropped over 3.5% to $63.3 per barrel this week, following a 9.9% drop in the previous period to their lowest level since April 2021, as mounting US-China trade tensions deepened fears about weakening global demand.
Brent falls for second consecutive week
China's finance ministry announced it will raise tariffs on US goods to 125%, escalating a back-and-forth tariff war that has already sent shockwaves through international markets. In response, the White House confirmed that total US tariffs on Chinese imports now effectively amount to 145%, further straining trade relations between the world's two largest economies. This development has sparked concerns about the potential long-term impact on global trade and economic growth, which is starting to weigh on oil prices.
The US Energy Information Administration (EIA) also cut its global growth outlook, revising down its demand forecasts for both the US and the world. The agency highlighted that trade frictions, along with geopolitical instability, could create further headwinds for oil consumption, especially in key markets that drive global demand. The EIA’s assessment reinforced the notion that slowing economic activity, particularly in major oil-consuming regions like Asia and the US, could lead to a prolonged period of weaker demand for crude.
OPEC+ plans to increase oil output
Adding to the bearish sentiment, OPEC+ surprised markets by accelerating its plans to increase oil output, despite ongoing concerns about market oversupply. The decision to boost production came as part of a broader strategy to ease the burden of high oil prices on consuming nations, but it raised alarms about the possibility of a supply glut amid tepid demand projections. Market analysts have expressed concerns that this increase in output, combined with weakening global demand, could further depress oil prices in the coming months, exacerbating the current downtrend. With both demand and supply factors contributing to downward pressure, oil prices are expected to remain volatile as investors navigate the uncertain global economic landscape.
