Tariffs: Oil markets showed little reaction to President Trump’s threat of imposing tariffs on buyers of Russian crude, as traders remain uncertain about the likelihood of enforcement. Analysts believe the market is hesitant to overreact until concrete action is taken, with oil prices stabilizing after recent declines. China’s state oil companies have reduced Russian crude purchases, while India continues to buy from non-sanctioned suppliers, highlighting differing responses to U.S. pressure. The effectiveness of potential sanctions will depend on enforcement and whether OPEC adjusts production to compensate for any Russian supply disruptions.

China Manufacturing Activity: China’s manufacturing activity expands at its fastest pace in a year, driven by strong domestic demand and government stimulus efforts. Rising new orders and infrastructure spending support growth, but analysts warn that trade tensions and deflationary pressures could limit momentum. Meanwhile, China’s oil consumption is set to increase by 1.1% in 2025, fueled by petrochemical demand and a booming electric vehicle sector, though transportation fuel use has peaked. Uncertainty looms as President Trump’s proposed tariffs on Chinese goods and potential sanctions on oil imports from Russia and Venezuela could disrupt global trade and energy markets.

SPR Replenished: The Trump administration added 1.1 million barrels of crude to the Strategic Petroleum Reserve in March, significantly outpacing February’s modest 200,000-barrel addition. As of Friday, the SPR held 396.4 million barrels, with all recent additions consisting of sour crude. The DOE had initially planned to add over 2 million barrels last month, but logistical delays pushed deliveries into March. Despite Trump's pledge to quickly refill the reserve to pre-2023 levels, questions remain about the pace of replenishment, as the DOE has not addressed ongoing delays in February and March deliveries.

Market Overview: Oil prices hold near five-week highs Tuesday morning as geopolitical tensions and potential U.S. tariffs on Russian and Iranian crude add supply concerns to the market. President Trump’s threats of secondary tariffs on Russian oil buyers and possible military action against Iran counter worries about slowing global growth and weaker energy demand. Meanwhile, Kazakhstan's export disruptions and ongoing OPEC+ policy decisions add further uncertainty. Analysts estimate U.S. crude inventories decline, offering some support to prices despite global economic headwinds.

2025 Forecasts

West Texas Intermediate crude is projected to average $69.16 per barrel in 2025, as forecasts indicate that slowing economic growth in China and India, combined with U.S. tariffs, will weigh on demand. Analysts warn that a widening global crude surplus of 300,000 barrels per day could keep prices under pressure, despite OPEC+ plans to increase production. Meanwhile, geopolitical risks remain a wildcard, with U.S. sanctions on Iran and Venezuela tightening supply, while potential peace talks between Russia and Ukraine could ease sanctions on Russian oil. OPEC expects global oil demand to rise by 1.45 million barrels per day in 2025, but concerns over economic slowdowns and inflationary pressures may challenge that outlook. With OPEC+ likely to manage supply carefully, the market remains finely balanced between supply constraints and weakening demand fundamentals.

Oil prices edged lower on Tuesday as markets braced for new U.S. tariffs set to be announced Wednesday, fueling concerns over a global trade war. However, gasoline and distillate prices finished the day slightly higher, supported by refinery maintenance and stronger seasonal demand. Supply fears from potential secondary sanctions on Russian oil and military threats against Iran helped limit losses. WTI crude settled down 28 cents at $71.20 per barrel, after reaching a five-week high on Monday. Analysts expect slower global economic growth and U.S. tariffs to weigh on oil demand, even as OPEC+ continues modest production hikes. Meanwhile, U.S. crude inventories are projected to have fallen by 2.1 million barrels last week, which could provide some near-term price support.