Oil prices steadied on Tuesday following a tumultuous week marked by significant declines due to worries about increased supplies under U.S. President Donald Trump, coupled with uncertainties regarding long-term demand.
Weak economic data from China raises demand concerns
Weak economic indicators from China, the leading importer, have ignited apprehensions about the long-term demand for crude oil. Recent stimulus actions from Beijing seemed to provide only temporary relief to the economy, raising further doubts among analysts.
Chinese markets are currently closed for the week-long Lunar New Year holiday.
Broader market risk-off sentiment impacts crude prices
Crude prices also faced pressure from a broader risk-off sentiment prevailing in financial markets. Losses in equities—stemming from concerns about a disruptive new artificial intelligence model emerging from China—have rippled through other sectors.
As of 20:25 ET (01:25 GMT), Brent oil futures for March delivery increased by 0.2 percent to $77.21 a barrel, while West Texas Intermediate crude futures similarly rose by 0.2 percent to $73.30 a barrel.
Trump energy plan, OPEC comments dent crude
Oil prices experienced a sharp decline of approximately 5 percent over the past week, with the downturn following Trump’s announcement of a national energy emergency, which included a call to escalate U.S. production.
While analysts remain skeptical that this move will yield an immediate boost in oil supplies, Trump’s initiatives suggest a potential long-term increase in U.S. oil output, which already averaged record highs exceeding 13 million barrels per day in 2024.
Trump also urged the Organization of Petroleum Exporting Countries (OPEC) to augment production to help lower oil prices.
China PMIs, DeepSeek spur demand fears
The oil market also reacted negatively to fears of reduced energy demand, influenced by the introduction of more efficient artificial intelligence models, particularly following the release of China’s DeepSeek R1. This model claims to rival competitors like ChatGPT in performance while consuming significantly less cost and processing power.
DeepSeek raises critical questions regarding the necessity of extensive investment and growth in data center infrastructure. A decline in data centers indicates a potential decrease in energy demand.
Additionally, oil prices were pressured by disappointing Chinese purchasing managers index data, which revealed that local business activity is slowing, despite recent stimulus efforts from Beijing.
