Oil Drops 3% as Trade War Hits Demand Outlook and EIA Slashes Forecasts
Oil prices are headed for another weekly loss with Brent down 3.2% and WTI 2.9% as of Friday.
Last week was brutal with an 11% decline as the US-China trade war continues to hammer demand expectations.
The latest hit came from President Trump’s move to increase tariffs on China to 145% and pause duties on dozens of other countries for 90 days. China quickly retaliated and the fear is that a prolonged economic standoff between the two largest economies will hurt global growth.
“Reduced trade volumes and disrupted supply chains will weigh on long term demand” said analysts at BMI on Friday, crude is still vulnerable to more downside.
EIA Cuts Demand Forecasts Amid Economic Slowdown
The US Energy Information Administration (EIA) made it even worse by cutting global growth and demand forecasts for 2024 and 2025. The revisions come as trade tensions will slow industrial activity and cut into fuel for transportation and logistics.
“If global GDP goes below 3% we estimate oil demand will drop 1%” said Daniel Hynes, senior commodity strategist at ANZ.
By the Numbers:
Brent weekly loss: -3.2%
WTI weekly loss: -2.9%
Tariff rate on China: 145%
Demand impact: -1% if global GDP goes below 3%
EIA forecast: Demand growth cut through 2025
Technical Setup: Recovery is Fragile
WTI is currently trading at $60.87 after bouncing from a key support at $59.13 which is the 23.6% Fibonacci retracement. While this is a short term bounce oil is capped by the 50 day EMA at $62.94 so the bigger trend is still bearish.
Resistance Levels:
$61.63 – 38.2% Fibonacci retracement
$63.65 – 50% retracement
$65.67 – 61.8% retracement
Support Zone:
$56.82-$55.12 rangeThe RSI is 48, neutral momentum and no conviction in either direction. Without a break above key resistance zones, technical bounces will be short lived.
What’s Next? May 5 OPEC+ Meeting
The next big event for oil is the May 5 OPEC+ meeting where they will decide whether to adjust supply. Some hope for production cuts to support prices but a surprise increase in supply will trigger another leg down.
Bottom Line
With trade tensions rising, economic forecasts weakening and technicals showing fragile momentum the oil market is under pressure. Unless OPEC+ intervenes or macro improves any rally will be short lived—WTI and Brent at risk of more downside.
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