Crude oil prices fell on Tuesday as investors adjusted their demand growth expectations due to the ongoing trade war between the United States and China, the world’s two largest economies. Brent crude futures dropped by 43 cents, or 0.7 percent, to $65.41 per barrel by 04:00 GMT. Meanwhile, U.S. West Texas Intermediate crude futures decreased by 40 cents, or 0.6 percent, to $61.65 a barrel. Both benchmarks had already fallen by more than $1 on Monday.Â
“Markets are closely monitoring the U.S.-China trade negotiations, understanding that deteriorating trade relations between the world’s two largest economies could lead the global economy towards a recession,” Reuters reported, quoting Priyanka Sachdeva, senior market analyst at Phillip Nova.
Lack of confidence in future demand
“The lack of confidence in future demand and the absence of concrete signals for demand revival in mainland China will continue to overshadow oil prices.” U.S. President Donald Trump’s initiative to reshape world trade by imposing tariffs on all U.S. imports has created a high risk that the global economy may slip into a recession this year, according to a majority of economists surveyed in a Reuters poll.
Read more: Crude oil prices climb above $67 on U.S.-China trade uncertainty, OPEC+ output hike bets
Trade war escalates between top oil consumers
China, hit hardest by those tariffs, has retaliated with its own levies against U.S. imports, intensifying the trade war between the top two oil-consuming nations. This situation has prompted analysts to significantly lower their forecasts for oil demand and prices. Barclays, for instance, cut its 2025 Brent crude price forecast by $4 to $70 a barrel, citing elevated trade tensions and a shift in production strategy by the OPEC+ group, which is expected to create a 1 million barrel per day oil supply surplus this year.
OPEC+ plans production increase
Meanwhile, several members of OPEC+, which includes the Organization of the Petroleum Exporting Countries and its allies, are expected to propose an acceleration of output hikes for a second consecutive month in June, according to sources speaking to Reuters last week. “A substantial (oil) price decrease appears probable if exporting countries boost production,” oil analyst Philip Verleger told Reuters.
U.S. crude oil stockpiles expected to rise
U.S. crude oil stockpiles are also likely to have risen by about 500,000 barrels in the week ending April 15, according to a preliminary Reuters poll of analysts conducted on Monday. The American Petroleum Institute is set to publish its estimates on U.S. oil inventories on Tuesday, with official figures from the Energy Information Administration to follow on Wednesday.
