Petrol Prices to Slump as Trump’s Trade War Kills Oil Demand

The global oil market is teetering on the edge of a historic collapse, driven by the lingering aftershocks of the Trump-era trade war. As tariffs and retaliatory measures disrupt supply chains and stifle economic growth, the demand for crude oil has plummeted, setting the stage for a prolonged period of low prices. By 2025, the consequences of these policies have coalesced into a perfect storm of oversupply, geopolitical tension, and structural shifts in energy consumption.

The Trade War’s Demand Destruction

The trade war’s most immediate impact has been to throttle oil demand. Rystad Energy estimates that prolonged trade tensions could halve China’s oil demand growth, shaving 1% off its GDP and pushing Brent crude below $60/barrel—a level not seen since 2023. The U.S. Energy Information Administration (EIA) has slashed its 2025 global oil demand growth forecast by 1.2 million barrels per day (bpd), with 60% of the reduction directly tied to trade war fallout. OPEC, too, has revised its 2025–2026 demand growth estimates downward to 1.3 million bpd, a stark contrast to pre-tariff optimism.

The pain is already visible in real-time data. Brent crude fell 7% in April 2025 after new tariffs on $200 billion of Chinese goods, briefly dipping below $60/barrel. U.S. crude (WTI) plummeted to $55.12—its lowest since 2023—before a temporary tariff pause offered fleeting relief. Goldman Sachs warns that prices could sink further to $49.50/barrel if retaliatory measures intensify, a scenario that would upend budgets for oil-dependent nations and leave producers scrambling.

Oversupply and the Shale Sector’s Fragility

The oversupply crisis is compounding the demand slump. OPEC+, instead of curbing production to stabilize prices, accelerated output by 411,000 bpd in May 2025, exceeding prior targets. This has created a projected 1.5 million bpd surplus by Q3 2025. Saudi Arabia’s aggressive pricing tactics—such as a $1.50/barrel discount to Asian buyers—highlight its cost advantage ($3/barrel production costs) versus U.S. shale firms, which require prices above $50 to break even.

The shale sector is on the brink. Dallas Fed surveys reveal that 81% of U.S. producers need $65/barrel to drill profitably, yet prices are stuck near $60. Sustained weakness below that threshold could force rig cuts—potentially 50+ rigs—and slash capital expenditures. Pioneer Natural Resources (PVX), a bellwether shale producer, has seen its stock price drop 30% since early 2024 amid investor skepticism about long-term profitability.

Structural Shifts and Geopolitical Risks

The trade war’s legacy extends beyond temporary price swings. Goldman Sachs and Wood Mackenzie warn of permanent demand destruction, with 60% of at-risk 1.2 million bpd demand loss tied to declining petrochemical feedstock use. Meanwhile, electric vehicle adoption is accelerating: global EV sales surged 40% year-over-year in Q1 2025, further undermining traditional consumption patterns.

Geopolitical risks loom as well. Potential Iranian sanctions relief could add 500,000 bpd to global markets by 2026, deepening the oversupply. U.S. inventories in Cushing, Oklahoma, already swelled by 15 million barrels in 2025 due to redirected crude from China, while U.S. refiner margins have collapsed to $4.50/barrel—the lowest since 2020—discouraging crude purchases and delaying refinery upgrades.

Conclusion: A Bearish Outlook Cemented

The trade war has transformed the oil market into a high-stakes gamble. With prices projected to test $50/barrel by late 2025, the structural weaknesses in demand and supply are clear. The EIA’s slashed forecasts, OPEC’s misaligned production decisions, and shale’s profit implosion all point to a prolonged bear market. For investors, the risks are stark:

• Demand destruction is real: 1.2 million bpd of potential demand loss, with 60% likely permanent.
• Shale’s limits are exposed: 81% of U.S. producers require $65/barrel to drill profitably, yet prices are near $60.
• Geopolitical overhang persists: Iranian sanctions relief and OPEC+ volatility threaten further declines.

The writing is on the wall: the era of $100 oil is over. Investors in oil equities—whether in majors like Exxon (XOM) or shale players like Continental Resources (CLR)—must brace for a prolonged downturn. The trade war’s legacy will outlive its tariffs, reshaping energy economics for years to come.