Oil Prices Drop as Trump Intensifies Trade Dispute with China

Oil prices fell by around 1% on Thursday following a significant escalation in the trade war between the United States and China, despite US President Donald Trump announcing a 90-day pause on tariffs aimed at other countries.

The price of Brent crude futures declined by 73 cents, or 1.1%, to settle at $64.73 a barrel, while US West Texas Intermediate (WTI) crude dropped 49 cents, or 0.8%, to $61.86 per barrel.

This drop followed a volatile session on Wednesday, during which oil prices initially plunged by as much as 7%, before recovering to settle 4% higher. The sharp reversal was driven in part by Trump’s announcement of the tariff pause for certain nations, providing a temporary sense of relief for financial markets globally.

However, Trump’s actions were far from conciliatory towards China. On Thursday, he raised the tariff rate on Chinese imports to 125%, effective immediately, up from the previously imposed 104% tariff. In retaliation, China introduced an 84% tariff on US goods, further intensifying the trade conflict.

In addition to the trade tensions, a recent report from the US Energy Information Administration (EIA) revealed that US crude inventories had risen by 2.6 million barrels for the week ending April 4. This increase nearly doubled analysts’ expectations, which had predicted a rise of 1.4 million barrels. The rise in inventories added to concerns about oversupply in the market, especially amid ongoing tensions in global trade.

The situation was further complicated by the closure of the Keystone oil pipeline, which runs from Canada to the US The pipeline remained shut on Wednesday due to an oil spill near Fort Ransom, North Dakota, with operators still assessing plans for its return to service.

Despite these challenges, the oil market had experienced a brief rebound earlier this week, as prices surged by nearly 5% on Wednesday following Trump’s temporary suspension of higher tariffs. The partial reprieve raised hopes of a de-escalation in the trade war, though concerns about a global recession and a potential glut of oil, driven in part by the OPEC+ alliance’s decision to ease production cuts, kept the market under pressure.

Reuters and Bloomberg contributed to this report.