Oil Prices Find a Fragile Balance Amid Supply Shifts and Trade Uncertainty

The oil market entered 2025 teetering between a supply-driven rebound and the gravitational pull of trade wars. OPEC+’s abrupt shift to boost production in April, coupled with U.S.-China tariff fallout, has left prices hovering near $70 per barrel—a precarious equilibrium that may not last.

OPEC+’s Strategic Gamble

In April, OPEC+ flipped its playbook, announcing a 411,000 b/d supply increase to counter weakening demand and U.S. tariff pressures. This reversal of its 2022 production cuts sent a clear signal: geopolitical survival trumps market discipline. Countries like Iraq and Algeria, facing punitive 30%-plus tariffs on their exports, likely viewed the move as leverage to negotiate tariff relief ahead of President Trump’s Gulf visit.

The decision, however, backfired. Oil benchmarks dropped below $70, with Brent trading at $65 in early April—the lowest since 2021. The shows a steep decline after the OPEC+ announcement, underscoring market skepticism about the group’s ability to stabilize prices amid global economic headwinds.

Trade Wars Fuel Volatility

The U.S. “Liberation Day” tariffs on Chinese goods, effective April 2025, triggered a Q1 pre-tariff buying frenzy. Chinese exports surged 12.4% in March—tripling forecasts—to $313.9 billion, with the U.S.-China trade surplus hitting $27.6 billion. Yet this surge appears unsustainable. Singapore’s record container throughput in March suggests demand was pulled forward, setting the stage for a Q2 slump.

The IEA slashed its 2025 oil demand forecast by 300,000 b/d, while Goldman Sachs cut price projections by $15/barrel. Even China’s April oil imports—up 18% year-over-year—were driven by discounted flows from Iran and Russia, not organic demand growth. Meanwhile, U.S. tariff exemptions for consumer electronics briefly boosted copper prices to $10,170/tonne, but industrial sectors remain mired in uncertainty.

Geopolitical Tensions Complicate the Outlook

U.S.-Iran nuclear talks in Oman, described as “constructive,” hint at potential sanctions relief that could add 1 million b/d to global supply by 2026. Simultaneously, Beijing’s coal expansion plans, delaying its coal demand peak to 2028, and Italy’s delayed coal phaseout reveal how energy security concerns are trumping climate goals.

The U.S. steel sector’s backlash against Chinese investment—epitomized by the UK’s seizure of British Steel after a rejected aid package—adds another layer of uncertainty. highlights the sector’s volatility, a microcosm of broader trade tensions.

Conclusion: Navigating the Crosscurrents

Investors should prepare for prolonged oil market volatility. Key risks include:
- Demand erosion: OPEC’s 150,000 b/d demand cut and the IEA’s 300,000 b/d downgrade point to a fragile demand outlook.
- Trade-driven supply shifts: China’s reliance on discounted Iranian/Russian oil and U.S. tariffs could distort traditional supply chains.
- Geopolitical wildcards: U.S.-Iran talks and coal’s lingering dominance in Asia complicate energy transition timelines.

For now, Brent’s $65 level offers little margin for error. Investors may want to consider hedging with oil services stocks () or commodities less exposed to trade wars, like palladium (critical for emissions controls). The era of “cheap oil” is here—but its staying power depends on whether trade conflicts and geopolitical maneuvering can be contained.

The takeaway? Stay nimble. The oil market’s new reality is less about traditional fundamentals and more about navigating the turbulent intersection of geopolitics and trade.