Oil Prices Drop as Investors Weigh Tariffs Impact

Oil prices fell slightly on Tuesday as investors weighed US President Donald Trump’s tariffs and tried to figure out how much the US-China trade war could reduce global economic growth and oil demand.

During the session, Brent crude futures declined by 21 cents or 0.3 per cent to $64.67 per barrel and the US West Texas Intermediate (WTI) crude futures dropped 20 cents or 0.3 per cent to settle at $61.33 per barrel.

The on and off US trade policies have created uncertainty for global oil markets and has led to many analysts changing their outlook.

The Organisation of the Petroleum Exporting Countries (OPEC) cut its 2025 global oil demand growth forecast on Monday for the first time since December, citing the impact of data received for the first quarter and trade tariffs announced by the US.

The cartel said world oil demand would rise by 1.30 million barrels per day in 2025 and by 1.28 million barrels per day in 2026. Both forecasts are down 150,000 barrels per day from last month’s figures.

The International Energy Agency (IEA) followed with its projection that global oil demand in 2025 will grow at its slowest rate for five years due to worries about economic growth from President Trump’s trade tariffs.

The agency said world oil demand this year would rise by 730,000 barrels per day, a sharp cut from 1.03 million barrels per day expected last month.

The reduction is larger than a cut made on Monday by OPEC by 150,000 barrels per day.

In its first look at 2026, the IEA predicted a further slowdown in demand growth to 690,000 barrels per day, due to a fragile economic backdrop and growing penetration of electric vehicles.

In China, economic challenges and a shift towards electric vehicles are tempering oil growth prospects in the world’s second-largest consumer, which had driven rises in oil consumption for years.

Reuters also reported that bank executives in the US warned consumer spending faces huge risks if the upheaval sparked by President Trump’s trade policy persists.

The country’s import prices unexpectedly fell in March, pulled down by decreasing costs for energy products, the latest indication that inflation was subsiding before President Trump’s sweeping tariffs came into effect.

There are worries the tariff policies could boost inflation, making it difficult for the US Federal Reserve to reduce interest rates.

Normally, central banks use higher interest rates to combat rising inflation, which boosts consumer costs and can reduce economic growth and demand for energy.

The American Petroleum Institute (API) estimated that crude oil inventories in the US rose by 2.4 million barrels for the week ending April 11. Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.