Oil prices are on track for a third consecutive weekly decline as fears that U.S. President Donald Trump’s tariffs on China could dampen global demand overshadow the impact of the U.S. administration’s first round of sanctions against Iran.
Brent crude, trading above $74 per barrel, has fallen more than 3% this week, while West Texas Intermediate (WTI) has dipped below $71. Trump’s tariffs on all Chinese imports have raised concerns, with China, the world’s largest oil importer, responding with its own tariffs set to take effect on Monday.
The ongoing trade dispute has fueled anxiety over its potential to slow global economic growth and, in turn, curb crude oil demand, with fears of a supply glut in the latter half of the year. Trump’s pledge to increase U.S. oil production to compensate for the loss of Iranian exports is also contributing to market uncertainty.
Analysts from RBC Capital Markets, including Helima Croft, pointed out that the majority of Iran’s remaining oil exports go to China. The ongoing tariff tensions could complicate this trade, although uncertainties persist regarding the duration and enforcement of the new measures.
Oil markets experienced significant volatility this week, initially surging on Monday when sanctions targeting Canada and Mexico—two of the largest foreign suppliers of crude to the U.S.—were poised to take effect. However, the measures were delayed by a month, sending prices into a downward spiral and pushing them to their lowest levels this year.
Additionally, physical oil markets are showing signs of easing. Crude prices in Europe have dropped to multi-month lows amid refinery maintenance, and the near-term timespread for Brent crude has narrowed to just 44 cents per barrel in a previously bullish backwardation pattern. This compares to a $1 difference in backwardation just a few weeks ago.
Despite this week’s steep price drop, some technical indicators suggest oil may be oversold, with the nine-day relative strength index nearing the 30 level, signaling potential for a price rebound.
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