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Markets quickly priced in the likelihood of a global trade war, driving both Brent and WTI to their steepest weekly losses in more than two years. With world economies already slowing, traders are now bracing for a sharp decline in oil demand. Saxo Bank’s head of commodity strategy Ole Hansen warned that the escalation “will hurt economic growth and demand for key commodities such as crude oil and refined products.”
OPEC+ Output Hike Deepens Bearish Sentiment
Further pressure came from OPEC+, which announced a more aggressive timeline for increasing output. The alliance now plans to return 411,000 barrels per day (bpd) to the market in May—well above the previously scheduled 135,000 bpd. This decision, made as demand indicators falter, is intensifying fears of an oversupplied market in the second quarter.
U.S. Economic Indicators Flash Warning Signs
The timing of the tariff escalation is compounding economic fragility in the U.S., where GDP forecasts have already been revised lower. S&P Global is now projecting just 0.3% growth for Q1, while the Atlanta Fed’s GDPNow model indicates a 1.4% contraction. High Frequency Economics has gone further, anticipating a full-blown recession with back-to-back quarterly declines.
At the same time, inflation is set to accelerate, with estimates placing CPI as high as 4%, up from 2.8%, due to rising import costs. Companies are responding with hiring freezes and job cuts. Stellantis, for example, announced nearly 1,000 layoffs linked to tariff pressures. Business sentiment is also deteriorating, with the ISM services employment index falling to a one-year low.
Bearish Oil Outlook Driven by Demand Destruction
With global growth slowing, tariffs hitting trade, and OPEC+ adding supply, crude oil markets face sustained downside risk. Demand destruction, rather than geopolitical disruptions, now dominates the outlook. Barring a rapid de-escalation of trade tensions, the forecast for oil prices remains firmly bearish.
More Information in our Economic Calendar.
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