Marketplace Frets Over Burgeoning Trade War and Negative Implications for Crude Oil Demand, Weighing on Oil Prices

Since U.S. President Donald Trump's inauguration on January 20, 2025, the price of West Texas Intermediate (WTI)-basis crude oil has declined by about 9% to $71.25 per barrel (/bbl) from $78.56/bbl on the last business day before the inauguration, as imposed and potential tariffs have dampened global "animal spirits."

Key Highlights:

-- The abrupt change in U.S. policies threatens global trade flows, economic growth, and crude oil demand, weighing on oil prices.
-- Thus far, tariff-related worries in the marketplace have more than offset oil price support from fresh U.S. sanctions levied on the Russian and Iranian energy sectors. Marketplace skittishness may prompt OPEC+ to extend its production cuts beyond March 31, 2025.
-- There is no change to our WTI-basis oil price forecast of $65/bbl for 2025 and $60/bbl for both 2026 and 2027.
-- Given the complexities and interrelated variables, it is difficult to estimate how tariffs will be apportioned along the crude oil-refined product supply chain.

"A burgeoning trade war and the related expectation for an increase in inflation are dampening expectations for global oil demand growth this year," said Andrew O'Conor, Senior Vice President, Corporate Ratings, Energy & Natural Resources. "However, most of our rated energy issuers are financially positioned to absorb the possible hit from imposed and potential tariffs, and we do not currently anticipate any credit rating actions as a direct result of these tariffs."