Oil Posts Third Weekly Drop as Trump Tariffs Hit Demand Outlook

Oil posted its third straight weekly decline as concerns that US President Donald Trump’s tariffs on China will sap demand outweighed his first round of sanctions against Iran.

West Texas Intermediate edged up 0.6% to settle at $71 a barrel on Friday after futures approached oversold territory on the nine-day relative strength index, signaling recent declines may be overdone. Crude still ended the week down 2.1% as Trump’s levies on imports from China and the country’s planned countermeasures threaten to slow global growth.

Adding to bearish sentiment, refiners in the Asian nation have slashed operating rates to lows last seen at the beginning of the pandemic. Previous US sanctions on Russia cut a key source of China’s crude supply, and demand also appears to be faltering.

The trade war — and the potential for it to spread — has stoked concerns that crude demand may falter and lead to a glut later in the year. The new US administration’s fresh sanctions on Iran stopped short of the “maximum pressure” campaign that had been pledged, and they probably won’t significantly add to supply disruptions already in place.

“Oil prices remain under pressure but show signs of support around current levels,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “The market fears that US tariffs on Chinese goods may further exacerbate the economic slowdown.”

Crude markets are readjusting to the volatility introduced by Trump. Earlier this week, tariffs on Canada and Mexico — America’s two largest foreign sources of crude — were due to come into effect before being delayed. The president has also moved futures with comments that he wants to bring oil prices down.

Europe also is showing pockets of softness. The crude grades that help underpin futures benchmarks are trading at the weakest levels in several months as processing plants in the region shut down. So-called timespreads, which offer a gauge of market health, have also slumped this week.