The oil price is declining as tariffs announced by US President Trump raise concerns over a global economic slowdown. WTI futures on NYMEX have fallen by approximately 12.75% to around $60.60 following the tariff announcement.
The new tariffs may lead businesses to delay investment plans globally, negatively impacting the oil demand outlook and further pressuring prices. China has threatened to impose additional tariffs of 34% on US imports in retaliation, which could exacerbate the situation as China is the largest oil importer.
Global Economic Risks
The International Monetary Fund’s Managing Director Kristalina Georgieva has advised the US and trade partners to resolve these tensions to mitigate risks to the global economy.
WTI oil is a key crude oil type sold internationally, sourced in the US and considered a benchmark in the oil market. Supply and demand, global growth, geopolitical issues, and OPEC’s decisions are primary factors affecting its price.
Weekly inventory data from the American Petroleum Institute and the Energy Information Administration plays a role in price determination. Lower inventory levels suggest increased demand, while higher levels indicate increased supply.
OPEC influences WTI prices by setting production quotas; lower quotas typically lead to higher prices, whereas increased production tends to lower them. OPEC+, which includes non-OPEC nations like Russia, also impacts the market.
Trade Tensions Impact
In light of recent events, with widening trade tensions and policy uncertainty, we’re seeing a clear knock-on effect on energy markets—particularly oil futures. Trump’s tariff announcement has sent a fresh chill through risk-sensitive assets, and WTI crude has not been spared. A steep drawdown of nearly 13% signals more than just a momentary dip; it reflects heightened expectations of a tighter investment cycle across borders.
As capital expenditures shrink, particularly in manufacturing-heavy sectors, global oil demand could cool faster than anticipated. Businesses have a tendency to pull back when visibility of returns becomes cloudy. This reduction in forward activity often coincides with downward revisions in growth projections—a scenario we’ve seen before, and one with substantive implications for derivative markets.
With China retaliating and adding the threat of 34% additional tariffs on US goods, two of the largest economies are effectively tightening financial conditions via policy tools. That shifts investor focus away from fundamentals and towards macro policy risk, which we’ve known to inject volatility. Traders will note that China remains the central driver of demand for crude, and any prolonged slowdown in imports there is likely to weigh heavily on sentiment.
Georgieva’s comments underscore just how exposed global trade has become to political friction. From our perspective, this isn’t mere diplomatic posturing—it’s an active variable that reshapes short and medium-term outlooks for commodities. If tensions are sustained or even escalate, defensive positioning within contracts could become more pronounced, especially on longer durations.
For those tracking near-term price action, API and EIA weekly data shouldn’t be viewed in isolation. Inventory movements are subject to noise, but when combined with broader demand forecasts, they give us insight into the pace of consumption. Rising stocks in particular could diverge from historical patterns if shipment volumes taper off amid shifting trade flows. This kind of asymmetry between expected and realised data is often mispriced, offering opportunity if monitored closely.
Decisions from OPEC and, more importantly, OPEC+ members such as Russia remain pivotal. Production guidance issued by such arrangements has historically moved markets, though lately the relative influence appears softer when set against persistent macro stress. That said, if cuts are deeper or more sustained than anticipated, we might see a floor under prices—though that remains conditional on demand stabilising.
At the moment, the market has little patience for uncertainty, and we find that trending moves—whether upward or downward—gain momentum faster than usual. That skew toward reactionary pricing is likely to persist until a clearer signal emerges from either inventories, central banks, or trade dialogue. For now, sensitivity to headlines and data beats remains elevated, and missteps in interpretation could lead to exaggerated swings.
