Global oil markets roiled as US-China trade war intensifies
Trump’s tariffs face Chinese retaliation, cutting global oil demand forecasts. Brent crude tests key support at $59.80, with analysts warning of potential long-term shifts in energy markets beyond the current crisis.
Global oil market volatility surges as US-China trade war escalates
The ongoing trade tensions between the United States and China have significantly impacted the global oil market, leading to heightened volatility and concerns about a potential recession. The latest round of tariffs imposed by both nations threatens to slash global oil demand growth, creating ripple effects across energy markets.
Trump administration's tariff policy
President Donald Trump's aggressive tariff strategy has been a major catalyst for market uncertainty. The administration has implemented a range of tariffs on Chinese imports, with measures aim to protect American manufacturing and national security interests, but they have also led to retaliatory actions from China.
China's retaliatory measures
Beijing has responded with its own tariffs, including reduced purchases of U.S. crude oil. These countermeasures have intensified market concerns and contributed to the volatility in oil prices.
Impact on oil demand
The trade war has forced significant revisions in oil demand projections. Global oil demand growth for 2025 is now expected to be as low as 700,000 barrels per day, down 40% from earlier forecasts. China, the world's largest crude oil importer, has seen its demand growth projections reduced from 500,000-600,000 barrels per day to just 50,000-100,000 barrels per day.
Broader economic implications
The trade tensions have broader macroeconomic implications, including:
• Global GDP growth: Forecasts have been revised downward to 2.5% or lower for 2025.
• Consumer confidence: Indices have declined in both the U.S. and EU.
• Sector-Specific effects: Volatility in transport, manufacturing, aviation, automotive, and petrochemical sectors due to reduced demand.
Long-Term outlook
Markets are now concerned about lasting damage to oil demand growth. The conflict could accelerate China's transition to renewable energy sources and lead to permanent changes in regional oil demand patterns.
Oil price volatility
Oil prices have responded with increased volatility, with Brent crude falling significantly since the tariffs were announced. OPEC+ is considering extending production cuts to stabilize prices, while U.S. shale producers have reduced drilling activity.
Unless diplomatic efforts succeed in de-escalating tensions, the oil market is likely to face continued pressure throughout 2025, with potential structural impacts extending beyond the immediate crisis.
Brent crude (weekly chart) – technical view
The price of brent crude is now considered to be in a long term downtrend and in the short term is testing key support at the 59.80 level. A break below this level, confirmed with a close, would suggest the next level of support to be at around the 47.00 level. Only on a move back above trend line resistance (red line) would an uptrend be reconsidered, but not confirmed.
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