Oil prices declined on Thursday as the U.S.-China trade war escalated. Despite announcing a 90-day pause on tariffs for other countries, U.S. President Donald Trump raised the tariff rate for China to 125 percent from the previously announced 104 percent tariff that had kicked off earlier on Wednesday.
As of 4:37 GMT, Brent futures were down 1.37 percent to $64.58 a barrel, while U.S. West Texas Intermediate crude futures lost 1.23 percent to $61.58.
Oil outlook uncertain as demand concerns arise
Following the tariff pause for most countries, oil prices settled 4 percent higher on Wednesday after dropping around 7 percent during the session.
China also announced an additional import charge on U.S. goods, imposing an 84 percent tariff starting Thursday. The escalating trade war between the U.S. and China adds a new layer of uncertainty in markets and will likely impact economic growth, which raises oil demand concerns. Oil prices are now expected to continue declining as optimism around the latest tariff pause fades.
China is the largest oil importer, and higher U.S. levies may weigh on the nation’s consumption of fuels and petrochemicals. Even before Trump’s return to the White House, the usage of gasoline and diesel had been contracting, in part because of the country’s extended property crisis and the spread of electric vehicles and renewables.
“Oil prices may continue to face pressure unless both the U.S. and China reach an agreement about tariffs. The recent tariffs war is heightening concerns about inflation, slower economic growth, and possible stagflation, all of which are contributing to the downward pressure on oil prices,” stated Vijay Valecha, chief investment officer, Century Financial.
OPEC+ supply increase to pressure oil prices
In the previous session, oil prices found support after the Keystone Pipeline declared force majeure on scheduled oil shipments. The Keystone oil pipeline from Canada to the United States remained closed on Wednesday following an oil spill near Fort Ransom, North Dakota, while plans to return it to service were being evaluated.
However, downside risks remained on signs of surging supply from OPEC members. Eight OPEC+ countries agreed last week to continue phasing out oil output cuts by increasing output by 411,000 barrels per day in May. The members of the Organization of the Petroleum Exporting Countries and allies led by Russia were set to raise output by 135,000 barrels per day next month as part of a plan to gradually unwind their most recent output cuts.
“The decision by OPEC and its allies to boost oil output could further impact prices. The planned increase in production levels, especially considering the substantial cutbacks in recent years, is seen as a significant challenge for oil prices moving forward,” added Valecha.
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U.S. crude stocks riseÂ
In the United States, crude inventories rose by 2.6 million barrels in the week to April 4, the Energy Information Administration said, nearly double market expectations for a 1.4-million-barrel rise. Separate data from the American Petroleum Institute (API) showed a nearly 1.1 million barrel draw in U.S. inventories over the past week. This draw follows several weeks of remarkable increases in inventories, a trend that has raised concerns about sluggish fuel demand.
