Oil prices remained near four-year lows on Tuesday, with steadying markets unable to overcome growing concerns about a potential recession triggered by escalating trade tensions between the United States and China, the world’s two largest economies.
At 1224 GMT, Brent crude futures had risen by 24 cents, or 0.4%, reaching $64.45 per barrel. Similarly, US West Texas Intermediate (WTI) crude saw a gain of 31 cents, or 0.5%, bringing its price to $61.01 per barrel. Despite these small upticks, both oil benchmarks had dropped by approximately 14% and 15%, respectively, on Monday, following US President Donald Trump’s April 2 announcement of “reciprocal tariffs” on all imports from China.
In response to these tariffs, which include a potential 50% increase on Chinese goods, Beijing has vowed not to succumb to what it calls US “blackmail,” further intensifying fears of an economic downturn. China’s Commerce Ministry emphasized that the country “will fight to the end,” ramping up global concerns about the future of international trade and economic stability.
According to SEB analyst Ole Hvalbye, the continued rise in trade hostilities signals an increasing risk of a global recession, which could in turn reduce global demand for oil.
“As the tone between the two nations becomes more hostile, the outlook for oil demand grows more uncertain,” Hvalbye explained.
The European Union has also weighed in on the escalating tensions by proposing a set of counter-tariffs on US goods in retaliation for the US’s steel and aluminum tariffs. However, there were signs of relief early on Tuesday, as oil prices rose by 1% following the steadier performance in equity markets. ING analyst Warren Patterson suggested that this slight rebound could be viewed as a “relief rally,” yet he acknowledged that the market’s pricing remains heavily influenced by growing concerns over weaker demand.
The oil market’s unease is also compounded by uncertainties around US-Iran relations. A surprise announcement from President Trump on Monday indicated that the US and Iran were set to engage in direct talks regarding Tehran’s nuclear program. However, Iran’s foreign minister clarified that the discussions would be indirect. RBC Capital Markets analyst Helima Croft noted that these talks could either increase oil supply if successful or potentially escalate into military conflict, further destabilizing the global oil market.
Meanwhile, inventory data published by Reuters indicated that US crude and distillate stocks likely increased by 1.6 million barrels the previous week, suggesting weakening demand expectations. Market participants are awaiting more detailed data, with the American Petroleum Institute and the Energy Information Administration set to release official figures in the coming days.
In terms of broader market dynamics, analysts are drawing parallels between today’s situation and previous oil market disruptions, including the 1997 Asian financial crisis. During that time, an increase in production and a slowing global economy combined to push oil prices below $10 per barrel. The current climate, shaped by higher output from Saudi Arabia and potential trade war impacts, has sent oil prices back to levels not seen since 2005.
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