Oil posts third straight weekly loss running as trade tariffs raise concerns about crude demand growth

But tighter US sanctions on Iranian exports pushing up futures on Friday

US President Donald Trump. China is not heavily reliant on US crude due to its diverse supply sources and could halt US imports if tensions persist, BMI said. EPA.

Oil prices recorded a third consecutive weekly loss, as prospects of a renewed trade war between the US and China raised concerns about crude demand growth.

Brent, the benchmark for two thirds of the world’s oil, settled 0.5 per cent higher at $74.66 a barrel. West Texas Intermediate, the gauge that tracks US crude, closed up 0.55 per cent at $71 a barrel.

Brent fell 1.33 per cent for the week, while WTI dropped 2 per cent.

On February 1, the US announced a 10 per cent tariff on Chinese goods. Beijing enacted retaliatory tariffs of 15 per cent on US coal and liquefied natural gas as well as 10 per cent on crude oil.

Analysts said the move could curtail US crude exports to China, contradicting President Donald Trump’s goal of expanding US oil and gas production and “unleashing American energy.”

“The future of US-China crude oil trade is uncertain following the imposition of tariffs on Chinese goods and China's retaliatory tariffs on US energy imports,” BMI, a Fitch Solutions company, said in a research note on Thursday.

“US crude oil exports to China, which peaked in 2023, have declined since, and China's tariffs may further reduce US competitiveness in China’s expanding market.”

US crude exports to China, the world’s second-largest economy, plunged nearly 46 per cent year-over-year to 81.9 million barrels last year, according to Kpler data.

China is not heavily reliant on US crude due to its diverse supply sources and could halt US imports if tensions persist, the research firm said.

“The tariffs threaten the US's market share in China, forcing US producers to find new markets amid rising global competition,” it said.

Investors are also worried that a full-blown US-China trade war could disrupt global trade and weaken oil demand.

There is significant buying interest in US crude at $70 a barrel, but Mr Trump's trade policies and their potential impact on the global economy will likely support a “deeper retreat” in prices, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

Iran sanctions

However, oil prices gained on Friday as the US ramped up sanctions on Tehran's oil industry as part of Mr Trump's “maximum pressure” campaign.

On Thursday, the US Treasury Department announced that it was placing sanctions on an international network shipping “millions of barrels” of Iranian crude to China, which includes individuals and entities in China and India, as well as several vessels.

This follows months of stricter sanctions enforcement by the Joe Biden administration, which targeted several companies and tanker operators in Iran’s “dark fleet” to disrupt Tehran’s ability to raise funds for its nuclear programme and Middle East proxies.

Iran has managed to endure US sanctions imposed in 2018, aimed at crippling its oil exports – a major source of revenue for the country.

After Mr Biden assumed office in 2021, sanctions enforcement was relaxed, leading China to become a significant purchaser of Iranian oil, often at discounted prices.

Iran raised crude oil output by about 1 million barrels per day (bpd) from 2020 to 2023 as its exports to China grew by almost 870 million bpd during the period, according to US Energy Information Administration data.

Canada, Mexico tariffs delayed

Earlier this week, the US delayed 25 per cent tariffs on goods from Mexico and Canada, easing concerns about a major disruption to crude oil flows to the world’s biggest economy.

Canadian energy imports face a slightly lower 10 per cent tariff, acknowledging US refiners' dependence on Canadian oil and gas.

These tariffs were set to take effect on February 4, but have now been delayed by 30 days for Canada and Mexico.

On Monday, the Opec+ alliance stuck to its production policy, despite pressure from Mr Trump to lower crude prices by boosting output.

Opec+ plans to unwind voluntary production cuts of 2.2 million bpd, which began in November 2023, starting in April. The supply curbs will be gradually eased each month until September 2026 in a bid to ensure market stability.

The group of crude producers has held back 5.86 million bpd of output through a series of measures announced in 2022.