Oil posts worst weekly loss since October on US tariffs and supply glut

Brent, the benchmark for about two thirds of the world oil, has lost about 5 per cent of its value since last Friday

US President Donald Trump's tariff policy has sparked volatility in oil markets worldwide. AP

Oil prices settled higher on Friday but posted its worst weekly loss since October on US President Donald Trump’s tariff policy and prospects of higher crude supply in the market.

Brent, the benchmark for two-thirds of the world’s oil, jumped 1.3 per cent to close at $70.36 a barrel. West Texas Intermediate, the gauge that tracks US crude, added 1.02 per cent to settle at $67.04 a barrel.

Brent, which lost about 5 per cent of its value since last Friday, dropped as low as $68.33 a barrel earlier this week, its lowest level since December 2021.

US tariffs and the Opec+ decision to boost production from April are fuelling the “bearish rout” in the oil market, FGE, an energy consultancy, said in a research note.

US President Donald Trump's tariff approach has pushed investors to the edge, with confusion over the White House's trade policy affecting market sentiment and sparking fears of an economic slowdown.

On Thursday, the US leader signed orders excluding most of the goods from Mexico and Canada from 25 per cent tariffs two days after imposing them. The amendment does not fully cover Canadian energy products, which face a separate 10 per cent tariff.

Canada, responsible for about half of US crude imports, supplied about 4 million barrels per day to its biggest market in 2024.

On Wednesday, Mr Trump granted a one-month tariff exemption to US car makers from the tariffs on Canada and Mexico, which global markets welcomed as a sign of easing trade tension.

This week, the US also imposed an additional 10 per cent tariff on China’s imports on top of an existing 10 per cent enacted last month.

“Oil markets are dealing with renewed uncertainty on the supply side and a darkening outlook on the demand side,” BMI, a Fitch company, said in a research note on Thursday.

“The ultimate impact of US tariffs on the global economy remains unclear but most see it as highly negative … broadly, the risks to oil prices remain tilted to the downside with new supply from Opec+ and non-Opec producers expected to push the market well into an oversupply,” BMI added.

On Monday, the alliance of producers said it would proceed with a “gradual and flexible” unwinding of voluntary production cuts of 2.2 million bpd starting on April 1, adding 138,000 bpd per month until September 2026.

Opec+ said the increase could be halted or reversed if market conditions deteriorate. The group is holding back 5.86 million bpd from the market as part of a series of production cuts made since 2022, representing 5.6 per cent of current global oil supply.

The International Energy Agency expects global oil supply to rise by 1.6 million bpd to 104.5 million bpd this year, while global oil demand growth is projected to average only 1.1 million bpd.