Oil prices experienced a decline as Brent dropped over 6%, falling below $70 per barrel. The rise in production by OPEC+ and concern over weakened demand due to US tariffs contributed to this downturn.
Prior to the tariff announcement, Brent was trading at $75. Tariffs could lead to a reduction in oil demand, particularly affecting China, which is heavily impacted by reciprocal tariffs.
US Crude Oil Import Surge
In the last reporting week, US crude oil imports from Canada increased by 11%, reaching their highest level since January. This surge occurred as US refineries anticipated upcoming tariffs, potentially impacting short-term demand for Canadian oil.
This recent retreat in Brent, slipping below the $70 mark, is more than just another swing—it reflects how sensitive the market still is to macroeconomic uncertainty and external policy shocks. The 6% dip wasn’t overly surprising if we look at how traders have been positioning in response to the escalating trade tensions. The tariffs announced, which primarily target Chinese goods, have stirred concern around a slowdown in industrial production and, by extension, demand for fuel.
Before these policy measures surfaced, Brent had been holding comfortably in the mid-$70s, suggesting a reasonable balance between supply and demand expectations. But markets shifted quickly. The swift drop post-announcement tells us that sentiment can unwind faster than supply can adjust, particularly when one side of the equation—demand—suddenly looks unstable.
China sits at the core of the demand outlook here. With reciprocal tariffs starting to flow, oil traders can no longer count on steady industrial consumption there, especially considering its reliance on energy for manufacturing and transport. That’s where concerns about a domino effect on global oil demand stem from—lower factory activity, less shipping, reduced growth expectations.
Meanwhile, the spike in US crude imports from Canada—an 11% jump week-on-week to levels not seen since January—highlights how some buyers are pushing forward their purchase timelines ahead of possible trade friction. The pre-emptive nature of these imports is telling; it reflects expectations that tariffs could disrupt regular supply patterns in the near term. It also suggests hedging activity may already be underway.
US Refineries’ Strategic Adjustments
For futures positioning, implied volatility could remain elevated, particularly in front-month contracts. The front-end of the curve has already started to reflect increased uncertainty, and we’ve seen spreads contract. With demand-side fragility on the radar, traders would do well to monitor shifts in refinery margins and utilisation rates, especially with US facilities adjusting intake strategies.
We’re also keeping an eye on how OPEC+ members respond—or don’t—to the latest price action. An increase in production amidst fragile demand expectations underlines a disconnect that may create more short-term selling pressure if not managed. That said, any signs of coordination or upcoming adjustments could trigger reversals, even mild ones.
Watching refinery inputs is also key. US refineries are moving early in anticipation, and that activity creates short-term distortions. These might provide tactical opportunities if addressed with precise short-duration spreads or calendar trades that capture the current divergences in demand assumptions versus booked capacity.
Inventory data over the next two reporting periods will be particularly actionable. Stock builds, if they emerge, are likely to compound existing pressure. But any drawdowns—depending on where they occur and by how much—could begin flattening backwardation curves and invite short-covering.
Stay vigilant over regional price differentials, especially those involving WTI and Brent, as arbitrage windows may briefly open. And keep in mind, with the dollar firming post-tariff news, purchasing power for non-dollar zones softens, which adds another minor headwind to demand recovery.
There’s no need to follow price alone. Demand proxies such as shipping data, petrochemical margins, and industrial metal orders are proving even more effective right now for positioning. With markets this reactive, relying on traditional inventory cycles alone could miss what’s actually driving the forward strips.
