Oil prices declined over 3 percent on Thursday after U.S. President Donald Trump announced new tariffs that are expected to spark a global trade war, impact economic growth and limit crude demand.
As of 4:48 GMT, Brent futures were down 2.29 percent to $73.23 a barrel after dropping around 3.2 percent earlier in the session. This fall marked Brent’s biggest daily percentage decline since March 5. Meanwhile, U.S. West Texas Intermediate crude futures lost 2.47 percent to $69.94 after slipping by as much as 3.4 percent earlier.
Tariffs to impact oil demand
On Wednesday, Trump announced a 10 percent tariff on most goods imported to the United States, the world’s biggest oil consumer, with higher duties on products from several countries. This announcement raised fears of a global trade war that may increase inflation and impact global economic growth.
Imports of oil, gas and refined products were exempted from the new tariffs, the White House said on Wednesday. However, the market’s focus is now on the global growth outlook and how it will impact oil demand and prices.
The tariffs sent shock waves through markets globally on Thursday, with Japan’s Nikkei falling to an eight-month low, China’s yuan dropping to its lowest levels in seven weeks, and stock markets slumping in early Asia trade.
Analysts noted that tariffs will be negative for trade, economic growth and thus oil demand growth but are yet to be certain about their full impact.
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U.S. crude stock grows
The U.S. Energy Information Administration (EIA) on Wednesday reported that U.S. crude inventories rose by a surprisingly large 6.2 million barrels last week which was a key factor weighing on oil prices. The large increase signals weakening domestic demand, further establishing a negative outlook for oil in the short term.
Investors now seem convinced that a tariff-driven U.S. economic slowdown might force the Federal Reserve to resume its rate-cutting cycle soon. Traders now look forward to the release of the weekly jobless claims and the U.S. ISM Services PMI. The data might influence the U.S. dollar dynamics and provide some support to crude prices. However, the focus will remain on trade developments, which will likely continue playing a key role in influencing oil prices in the near term.
