Oil prices edged higher on Tuesday, with Brent crude rising 1% to $64.87 per barrel and US West Texas Intermediate (WTI) climbing 1.1% to $61.37, according to Reuters.
The rebound followed a 14-15% slump in both benchmarks since 2 April, triggered by US President Donald Trump’s sweeping “reciprocal tariffs” on all imports, a policy critics warn risks tipping the global economy into recession. Analysts attributed the rally to stabilising equity markets and short-term bargain hunting, though cautioned that downward pressures persist.
Warren Patterson, head of commodities strategy at ING, noted the market had “sold off heavily” as traders priced in potential demand destruction, but stressed uncertainty over the scale of the impact. An ING report warned risks remain skewed to the downside, particularly if Trump follows through on threats to impose an additional 50% tariff on Chinese goods unless Beijing withdraws its retaliatory 34% levy.
Monday’s 2% price slide reflected mounting fears of a tariff-driven economic slowdown, with Brent and WTI closing at their lowest levels since April 2021. Concerns were compounded by rising US crude inventories, which a Reuters poll estimated increased by 1.6 million barrels last week, a sign of weakening demand.
Global repercussions
Trump defended the tariffs, claiming they would revive US manufacturing by countering decades of trade liberalisation. However, economists argue the measures could backfire by stifling growth and inflating consumer prices.
The Dallas Fed’s Q1 2025 survey revealed that US oil producers require an average of $65 per barrel to profitably drill new wells, a threshold now under threat, with WTI hovering near $61. Eurasia Group analysts suggested a price floor in the “$50s” may emerge as producers scale back output, though this would further complicate Trump’s pledge to boost domestic energy production.
China has vowed not to yield to US “blackmail,” escalating tensions by announcing reciprocal tariffs and stabilising its capital markets through state intervention. The European Commission has also proposed 25% counter-tariffs on US goods, deepening fears of a full-blown trade war.
Saudi Arabia, anticipating weaker demand, slashed May crude prices for Asian buyers to a four-month low, while OPEC+ accelerated plans to restore 411,000 barrels per day of production.
The oil market’s fragility underscores its vulnerability to geopolitical shocks. While Tuesday’s rebound offers temporary relief, the spectre of a 104% US-China tariff war looms large, threatening to erase gains and prolong volatility.
