Oil Prices Dip Again as U.S.-China Trade Tensions Rattle Markets
Oil prices are falling for the second week amid escalating U.S.-China trade tensions, raising fears of slower global growth and weaker demand.
After a brief recovery on Friday, global oil prices remain on track for a second consecutive weekly decline. Behind the dip lies a familiar story: escalating tensions between the world’s two largest economies—China and the United States—have renewed fears of a prolonged trade war that could stunt global growth and shrink energy demand.
Brent and WTI Bounce, But Weekly Losses Loom
Brent crude rose 90 cents to $64.23 per barrel in early trading on Friday, while West Texas Intermediate (WTI) added 88 cents, hitting $60.95. Yet these gains are little more than a short-term bounce. Over the week, Brent is still down 2.1%, and WTI has shed 1.8%. The drop follows an 11% plunge for both benchmarks just a week earlier.
That consistent downward momentum is making traders uneasy.
“Markets are jittery,” said Daniel Hynes, senior commodity strategist at ANZ. “Even a modest spark—like a tariff hike or disappointing economic indicator—can set off another slide.”
Trade War Tensions Overshadow Supply Concerns
The root cause of the market’s anxiety lies in deteriorating trade relations. Earlier this week, President Joe Biden authorized a significant tariff hike on Chinese imports, pushing rates to 145% on some goods. Although he paused similar tariffs for other U.S. trading partners, the move has reignited fears of retaliation from Beijing.
China quickly responded, announcing a fresh wave of levies on American exports. The tit-for-tat measures have raised alarms across the global supply chain.
“A drawn-out conflict between these two economic heavyweights will do more than just hurt trade—it could damage global energy demand,” noted analysts at BMI, a Fitch Solutions research firm.
They argue that the current policy trajectory suggests more instability ahead, stating: “We expect prices will remain under pressure as investors assess ongoing trade negotiations and rising tensions.”
Global Growth Concerns Are Real—and Growing
Trade disruptions aren’t the only factor weighing down oil. A deeper concern looms in the form of a global economic slowdown. The U.S. Energy Information Administration (EIA) lowered its global growth forecast, citing persistent inflation and ongoing geopolitical strife.
“The combination of tightening monetary policy, persistent trade disputes, and sluggish industrial activity could suppress demand for crude through 2025,” the EIA noted in its report.
Hynes of ANZ added that even a small dip in growth could have outsized effects on energy markets. “If global GDP slips below 3%, we estimate oil demand could decline by at least 1% year-over-year,” he warned.
Supply-Side Signals Offer Little Comfort
Meanwhile, producers are watching closely for cues from OPEC+. The oil cartel, along with allies like Russia, is scheduled to meet on May 5. That gathering could shape the market’s direction for the coming months.
Analysts say there’s potential for new supply announcements—though not all see that as good news.
“If OPEC+ signals a willingness to ramp up production, especially if demand remains weak, it could spark another round of selloffs,” said BMI in a market note Friday morning. “The market is extremely sensitive to even the perception of oversupply right now.”
In contrast, a commitment to curb output could stabilize prices in the short term, though such a move could come at a cost to members already under fiscal pressure.
Geopolitical Turbulence Adds Another Layer of Risk
Beyond economic policy and production forecasts, broader geopolitical volatility is adding fuel to the fire. The Middle East remains a point of concern following skirmishes between Israeli and Iranian proxies in Syria. Meanwhile, Russia’s ongoing war in Ukraine continues to disrupt oil flows in Europe.
“These conflicts may not directly impact pricing day to day, but they contribute to a persistent sense of uncertainty,” said Dr. Lucia Rahman, an energy policy expert at Georgetown University. “Markets don’t like unpredictability, especially when it affects transportation routes and energy infrastructure.”
Oil Market Volatility Is the New Normal
For traders and consumers alike, the implications are clear: expect more volatility ahead. Gasoline prices in the U.S. have remained relatively stable this spring, but experts warn that could change quickly if geopolitical tensions escalate or if OPEC+ makes a surprise move.
Meanwhile, U.S. shale producers have stayed cautious, unwilling to flood the market with new supply amid ongoing price instability and pressure from investors to prioritize returns over expansion.
What It Means for the Average Consumer
At the pump, U.S. drivers are feeling the early ripple effects of the oil market’s tug-of-war. According to AAA, the national average gas prices rose slightly this week but remain below the seasonal highs seen in previous years. However, further supply disruptions or a spike in global demand could quickly reverse that trend.
“For consumers, the most important thing to watch is what happens with OPEC+ and China,” said Sarah Johnson, a senior energy analyst at Morningstar. “If trade tensions ease and production is curtailed, we might see prices stabilize or even rebound. But the reverse is just as likely.”
Looking Ahead: A Market Waiting for Clarity
As investors await the outcome of next month’s OPEC+ meeting and track every statement from Beijing and Washington, oil markets are likely to remain choppy. With each new policy decision or diplomatic move, the balance could tilt toward either renewed gains or deeper losses.
For now, the industry is stuck in limbo—a waiting game with billions of dollars at stake.
Source: (Reuters)
(Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Market conditions can change rapidly, and readers should conduct their research or consult a qualified financial advisor before making investment decisions.)