Global oil prices have been experiencing remarkable movements recently. This shift has been driven by several intertwined factors, most notably US trade decisions and China’s oil import data. As investors try to understand these shifts, the gap between cautious optimism and concerns about an economic slowdown is widening.
Tariff Waivers Give Markets a New Boost
US President Donald Trump announced a series of tariff waivers for imported electronic products. This announcement has contributed to a boost in market confidence, particularly for commodities linked to economic growth, such as oil.
Brent crude futures have returned to levels near $65 per barrel, while West Texas Intermediate (WTI) crude has touched $61.66. Although the increases may not appear significant, their psychological impact on investors is clear.
These waivers have reinforced expectations of a recalibration of tariff policies on cars and auto parts imported from Canada and Mexico. It has been suggested that the 25% tariff could be reduced, sending positive signals to the market. Although markets received the news positively, some analysts expressed skepticism. Tina Teng, a market analyst, explained that Trump’s volatility makes it difficult to predict the direction of US trade policy.
Chinese data supports global demand
On the other side of the globe, recent data revealed a 5% increase in Chinese crude oil imports compared to last year. This increase is a sign that Beijing is preparing for the possibility of a decline in Iranian supplies, especially with the intensification of US sanctions. Chinese purchases of Iranian and Russian oil increased in March, helping to offset some supply concerns. These figures provided a strong boost to oil prices, especially in light of OPEC’s lower demand forecasts.
ConocoPhillips is also a major beneficiary of lower costs. It holds more than 20 billion barrels of resources, with costs below $40.
Trade tensions threaten stability
Despite apparent support from China and the United States, concerns have not yet dissipated. The trade war continues, and the conflict between Washington and Beijing escalated after Trump raised tariffs on Chinese goods.
Beijing responded by raising its tariffs to 125% on some US products. As tensions escalated, concerns emerged about a decline in global growth, which could negatively impact fuel consumption.
These concerns translated into downward revisions to oil price forecasts. For example, Goldman Sachs lowered its forecast average price for Brent crude for 2025 to $63, while BMI reduced its estimate from $76 to $68.
Implications for the US Market
The US measures reflect a dual effect. On the one hand, the tariff waivers support markets, while on the other, unstable policies reduce investor confidence. In a related development, data from Baker Hughes showed that US energy companies reduced the number of drilling rigs at the largest pace since June 2023. This decision is attributed to concerns about declining demand and weak returns in the short term.
Will the Iranian issue fuel higher prices?
The Iranian nuclear issue is another influencing factor. The United States has threatened to completely halt Iranian oil exports in an attempt to pressure Tehran. Amid this escalation, global supplies could shrink, potentially boosting prices.
Meanwhile, talks between the two sides began in Oman over the weekend. These talks were described as positive, potentially opening the door to easing tensions and, consequently, calming the market.
Are oil company stocks affected?
As oil prices fluctuate, the performance of energy companies shifts. Despite the relative decline in prices, some companies have demonstrated remarkable resilience, thanks to low production costs and vast resources. Devon Energy is a case in point. The company owns thousands of sites capable of generating profits even at $40 per barrel.
What awaits the market in the near future?
The US-China Trade War
Any further escalation between the two economic powers could lead to a slowdown in global growth.
Weak growth will reduce fuel demand, which could put pressure on prices. Conversely, any de-escalation or trade agreement between the two sides would boost market confidence.
Iran and US Sanctions
Continued tightening of sanctions could reduce global supply, supporting prices. If a new nuclear agreement is reached, Iranian oil exports could return to the market, leading to a decline in prices.
Chinese Oil Demand
China is the world’s largest importer, so any increase in its imports is a positive sign. However, if the Chinese economy faces a further slowdown, demand could decline and prices could begin to fall.
OPEC and OPEC+ Decisions
OPEC is likely to maintain its policy of cutting production to support prices. However, if some countries begin producing outside of agreed-upon quotas, this could lead to a market surplus.
Alternative Technologies and Clean Energy
The global trend toward reducing dependence on fossil fuels could put pressure on oil prices in the long term. However, this impact will remain limited in the near future due to the lack of fully mature alternatives.
The State of Global Financial Markets
Oil prices are strongly influenced by psychological factors related to stock markets, interest rates, and inflation rates. Improved investor sentiment could lead to broader purchases of commodities, including oil.
Is this the right time to invest in oil?
Despite the challenges, some see this period as an investment opportunity. Companies such as Devon, Conoco, and Chevron remain financially strong. With their ability to generate cash flows even at low prices, it may be wise to consider investing in them rather than adopting a negative outlook. However, caution is required, as markets can move in any direction.
