Oil prices bounce back amid global recession fears

April 08, 2025 (MLN): Oil prices rose more than 1% on Tuesday, rebounding after a hefty selloff in recent sessions led by concerns that U.S. tariffs might depress demand and lead to a global recession.

Brent crude futures increased by $0.69, or 1.07%, to $64.9 per barrel.  

West Texas Intermediate (WTI) crude futures rose by $0.76, or 1.25%, to $61.46 per barrel by [12:00 pm] PST.  

As of Monday, Brent and WTI had slumped 14% and 15% respectively following U.S. President Donald Trump's April 2 announcement of "reciprocal tariffs" on all imports.

Oil prices recouped some of those losses in a relief rally aided by steadier action in equity markets, said Warren Patterson, head of commodities strategy at ING.

"The market has sold off heavily in recent days as it starts to price in a significant demand hit; however, how much of a demand hit we see is still very unclear," he said.

An ING note on Tuesday also said risks are still skewed to the downside due to U.S. President Donald Trump's threats of an additional 50% tariff on Chinese goods if it doesn't lift its 34% retaliatory tariff by Tuesday.

"It's unlikely that China will reverse the policy. As such, we're likely to see further escalation, which will only exacerbate growth concerns and worries over oil demand," the note said.

On Monday, oil prices slid 2% due to fears that President Trump's latest trade tariffs could thrust global economies into recession and diminish energy demand. Markets, however, anticipate a potential limit to the downward trajectory of oil prices.

Trump maintains that the tariffs a minimum of 10% for all U.S. imports, with targeted rates of up to 50% - would facilitate the revival of the U.S. industrial base which he says has been declining due to decades of trade liberalisation.

While many countries are seeking an exemption or at least reduction in the tariffs, some, including China, the world's second-largest economy after the U.S., have announced plans for reciprocal tariffs, as Reuters reported.

Beijing has publicly stepped up efforts to stabilise its capital market, and vowed not to bow to "blackmail" from the U.S.

"Should China stand firm, the total tariff rate on its imports to the U.S. would climb to an astonishing 104%."

"This move is likely to trigger a further souring of risk sentiment, steep drops in global stock markets, and accelerate the pace of the global economy's descent into recession," Tony Sycamore, market analyst with IG, said in a note.

A preliminary Reuters poll showed on Monday that U.S. crude oil and distillate inventories were expected to have risen last week on average by around 1.6 million barrels, in another sign of the market expecting demand to be weak.

Weekly inventory data is due from the American Petroleum Institute industry group later on Tuesday, and official data from the Energy Information Administration is due on Wednesday.

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