Oil Markets Roiled by Global Trade Tensions and Tariff Threats

Crude prices remain near four-year lows as escalating trade conflicts overshadow market fundamentals. After briefly touching $63.90/bbl yesterday on rumors of a potential tariff pause, prices quickly retreated following White House denials. President Trump’s threat of 50% additional tariffs on China and demands that Beijing withdraw its 34% retaliatory duties by April 8 have further destabilized markets. The situation is compounding as the EU proposes 25% counter-tariffs on US imports and China pledges additional retaliatory measures.

Brent crude edged up to $64 this morning and WTI to $61, after Monday’s sharp 14–15% declines driven by tariff escalations. The risk of a global economic slowdown or recession, triggered by intensifying U.S.-China tensions, continues to cloud oil demand expectations. Beijing vowed not to yield to U.S. “blackmail,” and analysts warn that the hostile tone is fueling recession risks, further dimming the outlook for crude consumption.

Additional geopolitical developments are also stirring market uncertainty. President Trump’s surprise announcement of potential U.S.-Iran nuclear talks raised the prospect of either increased Iranian oil exports or heightened military tensions, depending on the outcome. At the same time, early inventory data points to a likely U.S. crude and distillate stock build of around 1.6 million barrels, underscoring concerns of weakening demand.

Meanwhile, fundamental shifts are occurring in global supply chains. Russian ESPO Blend crude fell below the $60/bbl Western price cap for the first time ever, while Chinese independent refineries are dramatically reducing Venezuelan crude imports in response to U.S. secondary sanctions. April projections show Venezuelan oil shipments to China dropping by 443 kbpd from March levels, with refiners pivoting to Canadian alternatives. Goldman Sachs now forecasts WTI prices declining to $58 by December 2025 and potentially to $51 by December 2026.

Diplomatic efforts may offer limited relief, with Treasury Secretary Scott Bessent expressing hope for eventual tariff reductions through negotiations with some 70 countries that have approached the U.S. However, he acknowledged that deals are unlikely to be made before the April 9 deadline when reciprocal tariffs take effect. As U.S. Energy Secretary Chris Wright prepares for a Middle East tour ahead of President Trump’s May visit, the oil market remains caught in the crossfire of broader geopolitical realignments that continue to reshape global energy trade patterns.

Looking further ahead, Vitol’s Long-Term Demand Outlook sees global oil demand continuing to rise through the end of this decade, peaking around 110 Mbpd, then plateauing before gradually declining to current levels (about 105 Mbpd) by 2040. However, the composition of that demand will change considerably. Road transport fuels, gasoline and diesel, currently make up about 45% of the barrel of crude oil but are expected to fall to less than half by 2040, primarily driven by EV adoption in passenger cars and LCVs. Progress here will hinge on vehicle availability and economics.

Conversely, sectors such as aviation and petrochemicals are positioned for growth on rising incomes, urbanization, and a lack of scalable alternatives. Jet fuel demand is forecast to rise from 7% to 10% of the barrel by 2040, largely fueled by travel expansion in Asia and other non-Western regions. Meanwhile, demand for petrochemical feedstocks like LPG and naphtha is set to grow as well, increasing their share of the barrel from 20% to 25%.