Oil futures suffered a significant drop, reaching their lowest levels in nearly six months, as concerns over the impact of U.S. President Donald Trump’s trade wars weigh on global demand, while OPEC+ signals a move toward increasing production.
Brent crude fell 2.4%, settling just above $69 per barrel, while West Texas Intermediate (WTI) dropped 2.9%, closing near $66. Both benchmarks recorded their lowest closing prices since early September. At one point, Brent crude came close to reaching its lowest level since December 2021 before recovering some of the losses.
Impact of Trump’s Trade Policies
Trump’s trade measures continue to threaten global energy demand by increasing economic uncertainty and reshaping oil flows. The outcome of these policies, including their final form and how long they will last, remains unclear. This uncertainty is adding pressure on the oil market, leading to a bearish outlook.
The market is increasingly concerned that these trade disputes will reduce global demand for energy, contributing to a growing sense of gloom around oil prices.
OPEC+ Production Hike and U.S. Supply Surge
On the supply side, OPEC+ countries are proceeding with a scheduled production increase, which is further contributing to the downward pressure on oil prices. Additionally, U.S. domestic crude stockpiles swelled last week, further stoking expectations of a supply surplus.
These developments come as global oil prices have been on a downward trajectory since mid-January. Trump’s policies, which have raised the prospect of multiple trade wars, have worsened the demand outlook. The bearish sentiment is now reflected in the market, with oil options traders showing their most pessimistic outlook in five months, and the volume of bearish put contracts surging.
EIA Data and Market Forecasts
According to the latest data from the U.S. Energy Information Administration (EIA), crude oil inventories increased by 3.6 million barrels, significantly higher than the median estimate of an 800,000 barrel rise. This contributed to growing concerns about oversupply and reduced demand.
As a result, many firms are revising their price forecasts for the year downward. Industry consultant Enverus has lowered its Brent price forecast from $80 to $70 per barrel for the year. Morgan Stanley also cut its second-quarter 2025 forecast by $5 to $70 per barrel, while Citigroup predicts Brent could fall to $60 a barrel.
Shifting Focus from Supply to Demand
“The market is repricing the downside risk in crude, shifting from a $65 floor in WTI to closer to $60,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “At this point, the focus has completely shifted from supply risks to demand concerns, which could signal we’re approaching a bottom.”
With supply risks now overshadowed by fears of declining demand, traders and analysts are bracing for further price declines, as the oil market enters a period of uncertainty and potential volatility.
Related topics:
