Oil prices rose in today’s trading, as Brent crude for May recorded $70 a barrel, extending gains for the second consecutive session. Despite this increase, prices are heading for their biggest weekly decline since October 2024. This price fluctuation reflects the uncertainty prevailing in global markets, which are heavily influenced by geopolitical and economic developments, especially with regard to US policy on tariffs.
Concern about the impact of U.S. tariffs has raised concerns about oil demand growth, as major producers prepare to increase output. As OPEC+ countries plan to roll back voluntary production cuts of 2.2 million barrels per day (bpd) starting in April, fears are growing that an escalation in the U.S.-China trade war, as well as tariffs, could slow global economic growth and consequently lower fuel demand.
Oil prices have fallen sharply in recent weeks, seeing a sell-off that pushed markets to multi-year lows. However, despite these losses, markets are beginning to show some recovery in an attempt to offset part of the decline, but global economic pressures continue to weigh on price movement.
Brent crude futures rose 0.78% to $70 a barrel, while US West Texas Intermediate crude prices rose the same percentage to $66.88 a barrel. However, prices are still heading for significant weekly losses, with Brent crude expected to fall by 4.9% and WTI crude by 4.8%, the largest decline since mid-October. Markets continue to closely follow economic developments and political decisions, as these factors will play an important role in determining future oil price trends.
The impact of tariff policy on oil prices
U.S. tariff policy has a significant impact on global oil markets through several economic channels that lead to changes in demand and supply. Since the United States began imposing tariffs on many goods imported from countries such as China, oil markets have seen a kind of volatility due to the uncertainty created by this policy. As duties increase, the cost of imported goods becomes higher, leading to price inflation and economic stagnation in some cases, which is directly reflected in fuel consumption.
The imposition of tariffs has negative effects on global economic growth, as other countries may suffer from a slowdown in growth due to lower international trade. This slowdown in the economy could reduce oil demand, as individuals and businesses reduce energy consumption due to lower industrial activity and higher production costs. A slowdown in the economy in China, the world’s largest oil importer, due to tariffs could cause a decline in global oil demand, leading to lower prices.
On the other hand, this situation may lead to changes in the production policies of oil-producing countries. If oil demand continues to decline as a result of tariffs, OPEC and its allies may face the additional challenge of adjusting production levels to avoid surpluses from accumulating in the market. Although some countries have committed to reduce production to support prices, any increase in production from some countries could exacerbate the gap between supply and demand, leading to additional pressure on prices.
Besides, the US tariff policy could lead to a change in investment trends, as some investors move away from commodity-linked assets such as oil due to economic volatility.
The impact of slowing economic growth on oil markets
Global economic growth slows, significantly affecting oil markets since oil demand directly links to economic growth. When the global economy slows, energy consumption, including oil, declines as individuals and businesses reduce spending due to lower industrial and commercial activity. In this case, the need for transportation and production decreases in industries, resulting in significantly lower demand for oil.
One of the most prominent effects of slowing global economic growth is the decline in international trade. As economic growth slows in major economies such as the United States and China, which is an important indicator of oil demand, oil markets become more vulnerable to volatility. Reduced industrial consumption and transportation reduce the need for oil, and therefore the market faces an oversupply, which puts pressure on prices and sometimes leads to them falling.
In addition, slowing economic growth could increase financial market uncertainty, prompting some investors to take a more cautious stance and shy away from investments in oil. This reluctance to invest contributes to reducing liquidity in the markets, which increases price volatility.
On the other hand, if the global growth slowdown continues for a long time, oil markets may also see a decline in new investment in the oil sector. Some companies have difficulty securing financing for their oil projects due to the decline in expected returns as a result of lower prices, which limits the ability of some countries and companies to increase production. Finally, slowing global economic growth could put additional pressure on OPEC and its allies, who may find themselves facing additional challenges in trying to balance supply and demand.
