Oil News: Will the U.S.-China Trade War Keep Crude Prices Under Pressure?

Crude Oil Weekly Recap: Trade War Escalation and Supply Glut Hammer Prices

Crude oil prices struggled this past week, battered by a mix of escalating trade tensions, surging U.S. inventories, and geopolitical uncertainty. While momentary rebounds provided traders with brief opportunities, the broader outlook remained bearish as global demand fears overshadowed any supply-side risks.

Last week, Light Crude Oil Futures settled at $71.00, down $1.53 or -2.11%.

Is the Trade War Choking Oil Demand?

The crude market was rocked by renewed trade hostilities between the U.S. and China, with fresh tariffs triggering a sharp reaction in oil prices. Washington’s decision to impose new levies on Canada, Mexico, and China sent shockwaves through energy markets, while Beijing’s swift retaliation—introducing a 10% tariff on U.S. crude—fueled worries of a prolonged economic slowdown.

Traders fear that the trade war’s impact could significantly reduce global crude demand, undermining economic growth and corporate investments. Although the U.S. postponed new tariffs on Canadian and Mexican energy imports, the uncertainty remains, keeping investors on edge. A strengthening U.S. dollar, driven by rising global risk aversion, further pressured crude by making oil more expensive for foreign buyers.

How Are Surging U.S. Crude Stockpiles Impacting Prices?

Oil prices came under additional pressure as U.S. crude inventories soared, highlighting weak refinery demand. The American Petroleum Institute (API) reported a build of over 5 million barrels, surpassing expectations. Meanwhile, gasoline stockpiles also increased, signaling weaker consumption and raising concerns about a supply overhang.

The Energy Information Administration (EIA) confirmed similar trends, with stockpile increases reinforcing the narrative of slowing demand. Seasonal refinery maintenance further exacerbated the issue, reducing crude throughput and leaving excess supply in the market. With inventories climbing and demand softening, traders remain wary of further downside risks.

Can Iran Sanctions Provide a Lifeline for Oil Prices?

Despite the overall bearish tone, geopolitical tensions surrounding Iran offered a measure of support to oil prices. The U.S. Treasury introduced fresh sanctions targeting Iranian crude exports to China, aiming to further restrict Tehran’s oil revenue. Analysts at Societe Generale estimate that these sanctions could cut Iran’s oil exports by half, potentially tightening global supply.

However, the market reaction was subdued. Traders remained focused on demand-side headwinds, with worries about slowing consumption outweighing any potential supply disruptions from Iran. This muted response underscores how macroeconomic pressures, rather than geopolitical risks, are currently dictating oil price movements.

Will Saudi Aramco’s Price Hike Revive Bullish Sentiment?

Saudi Aramco’s decision to sharply increase its official selling prices for Asian buyers was one of the few bullish signals in the market. The move indicates confidence in steady demand from the region, even as global economic uncertainties persist. Some traders interpreted this as a sign that Asian refiners remain willing to absorb higher crude costs, suggesting that demand in the region has not yet weakened significantly.

However, despite this optimism, broader concerns about a slowing global economy and trade disputes continued to cap any meaningful upside for oil prices.

Where Are Oil Prices Headed Next?

With mounting trade tensions, surging U.S. stockpiles, and a strong dollar weighing on crude prices, the market remains vulnerable to further declines. The critical support zone around $70 is being tested, and a decisive break lower could open the door to a slide toward $67.

On the upside, any bullish momentum will likely depend on potential supply disruptions, particularly from Iran, or if OPEC+ signals a shift in its production strategy. Until then, traders should brace for heightened volatility, keeping a close watch on trade developments, inventory data, and geopolitical risks to determine the next major move in crude oil prices.

Technically, the downside momentum suggests prices are headed into $70.80 to $69.55. Watch for a technical bounce on the first test of this area, however, if $69.55 fails as support, we could see a steep break.

More Information in our Economic Calendar.