Oil prices are on track to register their second straight weekly decline, as escalating trade tensions between the United States and China raise concerns over global economic growth and energy demand.
On Friday, Brent crude futures fell by 25 cents, or 0.39%, to $63.08 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 30 cents, or 0.50%, to $59.77 per barrel. Both benchmarks are set to record weekly losses of approximately 3.8% and 3.5%, respectively, following declines of about 11% each in the previous week.
The downturn in oil prices coincides with heightened trade tensions between the world's two largest economies. On Thursday, U.S. President Donald Trump increased tariffs on Chinese imports to 145%. In response, China announced on Friday that it would raise tariffs on U.S. goods to 125%, effective Saturday. These retaliatory measures have intensified fears of a global economic slowdown, potentially dampening oil demand.
Analysts attribute the recent price declines to the escalating trade conflict. UBS analyst Giovanni Staunovo noted that China's retaliatory tariffs have negatively impacted market sentiment, exerting downward pressure on oil prices. Ole Hansen, head of commodity strategy at Saxo Bank, observed that despite the U.S. delaying tariffs on other trading partners by 90 days, the damage to market confidence had already been done. BMI analysts anticipate continued pressure on prices as investors monitor the ongoing trade negotiations and rising tensions between Washington and Beijing.
The U.S. Energy Information Administration (EIA) has revised its global oil demand growth forecast for 2025, reducing it from 1.2 million barrels per day (bpd) to 900,000 bpd. This adjustment reflects concerns over the impact of new tariffs and trade uncertainties on economic growth and energy consumption. The EIA also trimmed its 2026 demand growth projection to 1.1 million bpd.
As the U.S.-China trade dispute continues to unfold, market participants remain cautious. The potential for further economic disruption poses a significant risk to global oil demand, suggesting that oil prices may remain under pressure in the near term.