Oil prices reversed gains from the previous session on Thursday as markets weighed economic uncertainty, trade tensions and shifting supply-demand dynamics.
Brent crude fell by 30 cents to $70.65 per barrel while U.S. West Texas Intermediate (WTI) declined by 31 cents to $67.37 per barrel as of 1140 GMT.
The pullback follows a 2% rally on Wednesday, triggered by a sharper-than-expected decline in U.S. gasoline and distillate inventories.
Government data showed a 5.7 million-barrel drop in gasoline stocks, far exceeding the 1.9 million-barrel decline projected by analysts.
However, the bullish sentiment was tempered by macroeconomic concerns and growing unease over geopolitical developments, particularly the potential impact of escalating trade tensions.
Trade War Fears and Market Volatility
U.S. President Donald Trump’s renewed tariff threats against the European Union have rattled investors, raising fears of a broader global trade conflict. Major U.S. trading partners have already signaled potential retaliatory measures, amplifying concerns over economic growth and consumer confidence.
“Declining U.S. gasoline inventories raised expectations for a seasonal demand increase, but concerns about the global economic impact of tariff wars weighed on the market,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment.
Trump’s stance on trade has also influenced oil market expectations, with Citi analysts projecting Brent prices to average $60 per barrel in the second half of 2025, reflecting potential demand pressures from a weaker global economy.
Supply-Demand Imbalance in Focus
The International Energy Agency (IEA) issued a fresh outlook on Thursday, forecasting that global oil supply could exceed demand by 600,000 barrels per day in 2025. The revision reflects a lower-than-expected demand growth forecast, which could place additional downward pressure on prices.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) noted a sizeable increase in February crude production led by Kazakhstan, raising concerns about compliance with OPEC+ output targets. The report underscores the challenge OPEC faces in enforcing production cuts, even as the cartel plans to gradually ease restrictions later in the year.
Demand Outlook Remains a Key Factor
Despite near-term pressures, some market analysts remain optimistic about global oil demand. JP Morgan analysts reported that as of March 11, global oil demand averaged 102.2 million barrels per day, reflecting a 1.7 million barrel per day increase year-over-year and surpassing earlier projections.
However, signs of softening jet fuel demand remain a concern, with U.S. Transportation Security Administration (TSA) data showing a 5% year-over-year decline in March passenger volumes.
Market Uncertainty Ahead
With competing factors shaping oil market sentiment, traders remain cautious about the near-term direction of crude prices. While falling inventories and seasonal demand growth provide support, global economic risks, trade tensions and rising production create headwinds.
As investors navigate these challenges, volatility is expected to persist, with crude markets reacting to both policy shifts and fundamental supply-demand changes in the coming months.
