Oil Prices Drop Amid U.S.-China Tariff Tensions, Demand Concerns

Oil prices fell during Asian trading on Friday, erasing gains from a brief rebound earlier this week. The downturn comes as fears grow over a deepening U.S.-China trade war and its potential impact on global oil demand. Brent crude futures for June slipped 0.3% to $63.13 a barrel, while West Texas Intermediate (WTI) crude dropped 0.5% to $59.36 a barrel by 20:58 ET (00:58 GMT).

Both benchmarks are poised to log a second consecutive weekly decline, each down roughly 3.7% as they hover near four-year lows. The recent pressure on oil prices stems from escalating trade tensions. While President Donald Trump delayed broad tariff hikes for 90 days, he moved forward with increasing tariffs on Chinese goods to 145%. In retaliation, Beijing imposed 84% tariffs on U.S. products and pledged to “fight to the end.”

With China being the world’s largest oil importer, traders are worried that higher tariffs could reduce demand. Markets also fear broader economic consequences, especially for the U.S., which still relies on many Chinese imports.

China is expected to introduce more economic stimulus to offset the impact, but Thursday’s weaker-than-expected inflation data suggests persistent economic challenges.

Adding to the bearish sentiment, the U.S. Energy Information Administration (EIA) revised its oil demand outlook downward. The agency now expects 2025 global oil demand to grow by only 900,000 barrels per day (bpd), down from 1.2 million bpd previously forecast. For 2026, demand growth is estimated at 1 million bpd. The EIA also cut its 2025 Brent crude forecast to $67.87 a barrel, down from $74.22, citing rising economic uncertainty and weaker energy demand expectations.

These developments are weighing heavily on investor sentiment in the oil market.