Oil prices fell by 3%, to their lowest levels in four years and marking the steepest five-day drop since 2022. Crude has lost about 20% of its value since early April, as escalating trade tensions between the United States and China raise concerns over a global economic slowdown and declining energy demand.
The downturn comes amid the latest wave of U.S. tariffs on Chinese goods, including a massive 104% duty. In response, China has announced retaliatory measures, further dimming hopes for a near-term resolution. Investors have reacted swiftly, pulling out of risk assets and driving down prices across commodities—from oil to industrial metals like copper, which has dropped nearly 10% since Trump announced his reciprocal tariffs on major trading partners.
The ongoing tariff escalation is creating uncertainty in markets and undermining demand forecasts for energy, especially from China, the world’s second-largest oil consumer. According to Rystad Energy, China’s anticipated oil demand growth—around 100,000 barrels per day—could be in jeopardy if the conflict drags on, though domestic stimulus might cushion some of the impact.
The situation is further aggravated by OPEC+ easing production cuts more rapidly than expected, which could contribute to a global oversupply. This one-two punch of weaker demand and rising output is pressuring prices and triggering bearish trends across the market.
Market indicators also reflect growing pessimism, while oil options show their most bearish positioning since late 2021. Implied volatility has surged, highlighting uncertainty among traders.
While the broader trade war may drive up costs for many goods, oil’s collapse—and associated declines in fuels like diesel and gasoline—could help balance inflationary pressures. U.S. gasoline futures, for example, have fallen around 16% so far in April.
Unless there is a significant de-escalation in the trade conflict, analysts warn that downside risks to global growth and energy markets will likely persist.