Oil Prices Slump as DeepSeek’s Low Cost AI Triggers Demand Concerns

By Adedapo Adesanya

Oil prices closed lower on Monday amid surging interest in Chinese startup DeepSeek’s low-cost artificial intelligence (AI) model prompting concerns over energy demand to power data centers.

Prices, which were already weaker from the previous week, fell further with Brent futures losing $1.42 or 1.8 per cent to $77.08 a barrel and the US West Texas Intermediate (WTI) crude declining by $1.49 or 2.0 per cent to $73.17 per barrel.

DeepSeek’s AI Assistant overtook its US rival, ChatGPT, to become the top-rated free application available on Apple’s App Store in the United States.

DeepSeek’s AI Assistant required almost 90 per cent less computational power to achieve what ChatGPT has been able to achieve.

According to market analysts, this is quite impactful because DeepSeek was funded with only $6 million, compared to the billions of US Dollars that had been sunk into other AI companies.

This fed doubts among investors who have poured money into US energy firms hoping AI would drive demand for energy to power data centers.

In most projections, AI represents about 75 per cent of overall US demand forecasts through 2030-2035.

Prices were also weakened as China’s manufacturing data was weaker than expected, adding fresh concerns over energy demand and highlighting the need for more policy efforts to stabilize economic growth.

Prices have been depressed recently following President Donald Trump’s call last week for the Organisation of the Petroleum Exporting Countries  (OPEC) to reduce oil prices.

The American president will continue to put pressure on OPEC and call on the producer group to lower prices to help end the Russian war in Ukraine.

OPEC and its wider alliance OPEC+ already has agreed to delay the planned output increase by three months to April 2025. Extending the full unwind of production cuts by a year until the end of 2026, a move that will ensure that oil markets are not oversupplied in 2025.

Meanwhile, the Trump administration pulled back from sanctions threats against Colombia over illegal immigration, alleviating concern about oil supply disruptions.

Colombia last year sent over 40 per cent of its seaborne crude exports to the US and the agreement will allow that oil to continue to flow.