Oil prices rebounded on Friday but notched a second weekly drop amid the tariff tumult that has sparked fears of a trade war, severe damage to global economic growth and subsequent crude demand destruction.
Brent, the benchmark for two thirds of the world's oil, settled at $64.76 a barrel, up 2.26 per cent. West Texas Intermediate, the gauge that tracks US crude, finished at $61.50 a barrel, up 2.38 per cent.
While crude was able to recover from a wild trading week dominated by US President Donald Trump's flip-flopping on tariffs, oil futures remain down as “concerns about tariff-induced demand reductions weighed on the market”, Jeanne Walters, a senior researcher at Emirates NBD Research, wrote in a note.
The intensifying trade war – triggered by Mr Trump's sweeping tariffs on imports last week – and concerns it could lead to a global recession and dent crude demand have dragged down oil prices.
Crude plunged to its lowest levels in more than three years last Friday, as China hit back against the US tariffs with its own additional levies on American goods.
The 12.5 per cent drop in Brent just between the close of Wednesday and Friday last week has happened only 24 times – and 22 of them were associated with a recession, analysts at Morgan Stanley noted.
Oil prices also plunged on Wednesday, after Mr Trump increased tariffs on China, nearing levels seen during the tail-end of the worst of the Covid-19 pandemic four years ago, further intensifying the market mayhem.
Each benchmark lost up to 6 per cent during trade on Wednesday.
From its recent peak of $74.95 on April 2 – the day Mr Trump announced the tariffs – Brent has lost nearly 21 per cent, while WTI has retreated about 22 per cent from $71.71 a barrel level on Wednesday.
However, Mr Trump reversed course later that day and allowed a 90-day pause on some tariffs for all countries except China, cheering markets but still casting doubt over where the tariff war was heading.
That sparked an oil rally, with prices surging by about 4 per cent. However, crude closed 3 per cent lower on Thursday, wiping out most of the previous day's gains.
“Trying to predict the next minute in this market is nearly impossible. The US has gone completely off script,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
While uncertainties persist, any rebound could be extended “if Mr Trump can just stay quiet for a few days, let the market digest the news and watch how companies react”, she added.
The Opec+ alliance of oil-producing countries last Thursday announced a larger-than-expected output increase. The group said it would add 411,000 barrels a day to the market next month, rather than 137,000 bpd announced earlier.
