Crude oil prices fall to a year-low as US-China trade war intensifies
Crude oil prices fell to their lowest level since 31 December 2024 amid the escalating US-China trade war. Investors are increasingly concerned about a slowdown in küresel economic growth and weakening energy demand in China, the world’s largest oil importer.
On Tuesday, China’s State Council Tariff Commission announced that it would impose a 15% levy on coal and liquefied natural gas (LNG) from the US, as well as a 10% duty on American crude oil, farm equipment, and certain vehicles, effective from 10 February. Additionally, veri from the US Energy Information Administration (EIA) revealed that US crude oil inventories had risen far beyond market expectations, further indicating weakened demand.
On Wednesday, West Texas Intermediate (WTI) crude futures slumped 2.3% to $71 per barrel, while Brent crude futures dropped 2.09% to $74.61 per barrel. Both oil benchmarks saw a slight rebound in Thursday’s Asian session but remained at their lowest levels this year.
Oil prices under pressure as US stockpiles grow
Crude oil prices have been in retreat as US inventory veri showed stockpiles had climbed for a second consecutive week. Crude inventories rose by 8.66 million barrels in the week ending 31 January, significantly surpassing the estimated increase of one million barrels. This followed a build of 3.5 million barrels in the previous week, suggesting weakening demand. Previously, US crude inventories had declined for nine consecutive weeks between late November and early January, pushing oil prices to five-month highs, peaking in mid-January.
Political factors have also weighed on crude markets. Last month, US President Donald Trump urged Saudi Arabia and OPEC to lower oil prices while reaffirming plans to increase US oil supply. This week, Trump imposed 10% tariffs on Chinese goods, triggering retaliatory measures from China and exacerbating concerns about slowing demand in the world’s two largest economies. The White House has also threatened to impose 10% tariffs on Canadian crude oil, though Trump has delayed the decision by 30 days for further negotiations.
Geopolitical tensions remain a bullish factor
Despite the current decline in oil prices, geopolitical tensions in the Middle East could continue to provide support. US President Trump has proposed taking control of Gaza, a move that could intensify regional conflicts. He is also expected to strengthen sanctions on Iran, having stated his intention to drive Tehran’s oil exports to zero.
Iran accounts for 24% of the Middle East’s oil reserves and 12% of küresel reserves, according to the EIA. Its oil exports have increased since 2022, following Russia’s invasion of Ukraine, with current supply reaching 1.5 million barrels per day, or 1.4% of küresel production. However, a report from S&P Küresel noted: “The election victory of Donald Trump as US president, as well as ongoing conflict in the Middle East, will likely see Iranian oil growth stall and threaten the country’s plans to increase its production capacity.”
Iran has urged OPEC to unite against potential US oil sanctions. On 3 February, OPEC+ agreed to proceed with its plan to gradually increase supply from April, while removing the EIA from its list of sources for monitoring production.
