Oil prices rebounded on Monday after last week’s declines, as investors appeared to downplay concerns over U.S. trade policies. The global energy market remains volatile due to increasing tariff threats on steel and aluminum imports, coupled with escalating geopolitical risks involving Russia, Iran, and China.
Despite the uncertainties, the oil futures market showed signs of resilience, with Brent crude and West Texas Intermediate (WTI) crude both gaining over 1%. Experts suggest that the oil price trajectory will be influenced by macroeconomic factors, supply chain constraints, and shifting demand dynamics across major economies.
Oil Prices Rebound Amid Tariff Volatility
Brent crude futures climbed $0.74 (1%) to $75.40 per barrel by 0938 GMT, while U.S. West Texas Intermediate (WTI) crude rose $0.72 (1%) to $71.72 per barrel. These gains followed three consecutive weeks of losses, largely driven by concerns about a potential global trade war and its impact on economic growth and energy demand.
According to Harry Tchilinguiran, head of research at Onyx Capital, “Tariff uncertainty remains the key driver of risk sentiment, influencing multiple asset classes, including commodities like oil.”
Market analysts emphasize that trade protectionism and import levies on raw materials could disrupt supply chains, increase manufacturing costs, and indirectly impact crude oil consumption across industrialized nations.
How Tariff Announcements Shape Market Behavior
The recent tariff proposals follow last week’s measures targeting Canada, Mexico, and China, which were later partially suspended. This back-and-forth in policy enforcement has made investors increasingly cautious but also more resilient to sudden tariff announcements.
Tony Sycamore, an analyst at IG, stated that markets are beginning to show less sensitivity to tariff news, realizing that policy shifts are unpredictable and often short-lived.
Instead of reacting to every headline, traders are now focusing on long-term structural factors affecting global crude markets, such as:
- OPEC+ production quotas and supply adjustments
- U.S. shale output fluctuations
- Refinery capacity utilization rates
- Strategic petroleum reserves (SPR) releases and their impact on price stability
China’s Retaliatory Tariffs and Energy Trade Implications
Meanwhile, China is set to implement retaliatory tariffs on certain U.S. exports, including key commodities like liquefied natural gas (LNG), refined petroleum products, and petrochemicals.
Beijing has yet to announce waivers for U.S. crude oil and LNG imports, leaving traders uncertain about the long-term sustainability of energy trade between the two economic superpowers.
- A disruption in U.S. crude exports to China could reroute supplies towards Europe, India, and emerging markets in Southeast Asia.
- LNG shipments face potential diversification, with buyers turning to Australia, Qatar, and Russia to mitigate risks from U.S.-China trade tensions.
US Sanctions on Russia and Iran Create Further Oil Supply Risks
Beyond trade concerns, geopolitical tensions continue to shape oil market sentiment. The U.S. has tightened sanctions on Russian crude exports, disrupting Moscow’s key supply routes to China and India.
On January 10, the U.S. government imposed new restrictions on Russian oil tankers, reducing the ability of Russian producers to sell discounted crude to Asia.
At the same time, the Biden administration escalated sanctions on Iran, targeting shipping networks and financial intermediaries involved in crude oil exports.
- Iranian crude shipments to China remain under scrutiny, as Washington pushes for stricter enforcement of sanctions.
- Iran’s oil sector continues to operate in a gray area, relying on covert shipping tactics and indirect trade routes to bypass U.S. restrictions.
According to Citi analysts, these sanctions add an upside risk to global oil prices, despite the White House’s efforts to drive down energy costs for consumers.
OPEC+ Strategy and Oil Market Stability
Beyond geopolitical factors, the role of OPEC+ in oil price stability remains crucial.
- Saudi Arabia and Russia, the de facto leaders of OPEC+, have signaled a cautious approach toward production cuts, ensuring market balance amid fluctuating demand.
- The alliance’s ability to manage production targets will directly impact oil price trends in 2025 and beyond.
Market watchers expect OPEC+ to maintain a flexible stance, adjusting output based on macroeconomic data, seasonal consumption patterns, and global inventory levels.
Long-Term Oil Market Outlook: Sideways to Bearish Trend Expected
Despite the current rebound, analysts at Citi Research predict that oil prices will likely trend sideways to slightly lower over the coming months.
- Brent crude is forecasted to average between $60–$65 per barrel in the second half of 2025.
- The Biden administration’s ongoing push for lower energy prices will likely exert downward pressure on global crude benchmarks.
However, the market could witness temporary bullish phases due to:
- Unexpected OPEC+ supply cuts
- Hurricane-related disruptions affecting U.S. Gulf Coast refineries
- Middle East geopolitical flare-ups leading to short-term oil supply shocks
Energy Transition and Its Effect on Oil Demand
A critical factor shaping the future of oil markets is the ongoing energy transition toward renewable and low-carbon alternatives.
- Increased EV adoption and improvements in battery technology could reduce long-term gasoline and diesel consumption.
- Hydrogen and synthetic fuels are gaining traction, particularly in Europe and Japan, creating potential headwinds for traditional fossil fuel markets.
However, in the short-to-medium term, global oil demand is expected to remain robust, driven by:
- Post-pandemic recovery in aviation fuel consumption
- Industrial growth in developing economies
- Increased petrochemical production, sustaining demand for crude derivatives
Conclusion
While oil prices are experiencing a short-term rebound, the market remains highly influenced by tariff uncertainties, geopolitical tensions, and supply chain disruptions.
- Trade war fears and shifting U.S. tariff policies will continue to impact investor sentiment and commodity prices.
- Sanctions on Russia and Iran pose significant supply risks, while OPEC+ plays a key role in price stabilization.
- The transition to cleaner energy alternatives presents long-term challenges, but global oil demand remains resilient in the near future.
As global trade tensions, policy shifts, and macroeconomic trends evolve, market participants must remain agile, leveraging hedging strategies and data-driven analysis to navigate the uncertain energy landscape.