Crude Oil Down as US-China Escalating Trade War Worries Investors

Yesterday, Brent crude futures fell by $2.15 or 3.3 per cent to $63.33 a barrel and the US West Texas Intermediate (WTI) crude futures depreciated by $2.28 or 3.7 per cent to settle at $60.07 per barrel.

Prices had risen on Wednesday after US President Donald Trump paused the heavy tariffs he had announced against dozens of trading partners a week ago, marking an abrupt U-turn less than 24 hours after the levies took effect.

At the same time, however, President Trump also raised tariffs against China bringing US tariffs on Chinese imports to a total of 145 per cent.

China announced an additional import levy on US goods, imposing an 84 per cent tariff.

Since returning to the White House in January, Mr Trump has repeatedly threatened an array of measures on trading partners, only to revoke some of them at the last minute.

The on-again, off-again approach has baffled world leaders and spooked markets, including the oil markets.

Higher tariffs against China are likely to prompt lower US crude imports by China, backing up supply and raising US storage levels.

Early signs from Kpler data show that US crude oil exports to China fell to 112,000 barrels per day  in March, nearly half of last year’s 190,000 barrels per day.

The US Energy Information Administration (EIA) on Thursday lowered its global economic growth forecasts and warned that tariffs could weigh heavily on oil prices, as it slashed its US and global oil demand forecasts for this year and 2026.

The EIA data had showed that US crude stockpiles rose by 2.6 million barrels last week on Wednesday.

There are high expectations that they will be another build this week.

Market analysts noted that the tariff-driven expectation of reduced demand amid the continued possibility of a US recession will remain front and center of trader concerns in likely keeping a lid on near-term price gains.