WTI crude oil may stay below $60 in H2-CY2025 on Trump tariff woes: Analyst

Oil prices: The 90-day relief on reciprocal tariffs could see crude oil prices edging a bit higher towards $65. However, overall, we expect prices to trade range bound between $65-$58

Oil Outlook: Trump's U-turn on reciprocal tariffs could see WTI heading towards $65 but outlook remains bearish

 

Oil prices have recovered, after hitting four-year low of $56.81/barrel last week, amid fears of escalating trade war between the US and China. However, while the White House paused reciprocal tariffs for 90 days for around 75 countries, except China, it has announced tariff exemptions on consumer electronics and semiconductors that could reduce the negative impact on China's economy by 0.4 percentage points.  

 

Last week was one of the most volatile weeks for Crude prices in four years as the prices tumbled over 20 per cent in 4 trading sessions amidst the trade war turmoil, coupled with the Opec slashing its crude oil demand outlook for 2025 and 2026. 

 

 

The cartel lowered demand growth projections for 2025 and 2026 by about 100,000 barrels a day, projecting an expansion of 1.3 million barrels a day or approximately 1 per cent for each year.

 

China stimulus awaited

China's domestic economy has shown increasing signs of weakness in April, particularly in the housing sector. Further policy easing is necessary, and the next few weeks could be a window for monetary policy actions as Trump's aggressive tariffs might slow China's economic growth by over 0.5 ppts by reducing exports, hurting business investment, and undermining consumer confidence.

 

China's crude oil imports in March 2025 rebounded sharply, compared to the previous two months, rising nearly 5 per cent year-on-year (Y-o-Y). This was mainly driven by a surge in Iranian oil imports and a recovery in Russian oil supplies. Total crude oil imports in March reached 51.41 million metric tonne, equivalent to an average daily import volume of 12.10 million barrels—the highest level since August 2023. 

 

This marks an increase compared to March 2024 -11.55 million barrels per day and the January-February 2025 period -10.38 million barrels per day.

 

US Crude production showing signs of fatigue due to price drop

 

The recent price correction in WTI is showing significant pressure on the US energy market as the active US oil rigs in the week ending April 11 declined by 9 to 480 rigs, The number of US oil rigs has fallen over the past years from the 4-1/2 year high of 627 rigs posted in December 2022. EIA reported 18 per cent decline in drilling activities in the past one year, while the new well is averaging around between $60-$65/barrel of production cost due to expressing hydraulic fracturing and horizontal drilling activities while the existing well costs between $35-$40/barrel. US production dropped 3 per cent in January 2025 to 13.15 mbpd from December 2024, the lowest output since Feb 2024.

 

Crude upside capped by OPEC+ decision

 

The cartel group surprised markets by deciding to boost crude production in May by 411,000 bpd, much more than the +138,000 bpd of crude production it added this month. Opec+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production. Opec+ fell in March by 37,000 bpd to 41.02 million bpd due in part to reductions by Nigeria and Iraq. Opec March  crude production fell -78,000 bpd to 26.78 million bpd.

 

Oil Outlook:

The 90-day relief on reciprocal tariffs could see crude oil prices edging a bit higher towards $65. However, overall, we expect prices to trade range bound between $65-$58. Oil prices could also benefit from policy support from China, which is expected anytime soon, but the medium to long term outlook would be affected by Trump's tariff policies and Opec+ decision to pump more oil, which could see WTI trading under $60 in H2CY25.

   

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Disclaimer: Mohammed Imran is Research Analyst at Mirae Asset Sharekhan