Oil prices dropped sharply on Thursday, with U.S. West Texas Intermediate falling $2.91 (4.2%) to $59.44 per barrel, and Brent crude dropping $2.77 (4.2%) to $62.71 per barrel.
The decline erased the previous session’s gains as investor sentiment shifted due to uncertainty over a partial pause in U.S. tariffs and escalating trade tensions between the U.S. and China.
The sharp drop in oil prices followed a brief rally on Wednesday, when both WTI and Brent crude gained over $2 per barrel after President Trump unexpectedly paused sweeping tariffs on several U.S. trading partners. This move marked a sudden reversal just a day after the tariffs were implemented.
Both contracts rose by over $2 a barrel on Wednesday after U.S. President Donald Trump unexpectedly paused the steep tariffs he had imposed on several U.S. trading partners just a week earlier. The reversal came less than 24 hours after the tariffs took effect.
However, Trump simultaneously escalated trade tensions with China, raising tariffs on Chinese imports to a total of 145%, the White House confirmed on Thursday.
China also responded with an additional import levy on U.S. goods, imposing an 84% tariff last Thursday.
According to trading advisory firm Ritterbusch and Associates, the higher tariffs are expected to reduce China’s imports of U.S. crude, leading to a buildup in U.S. supply and increased storage levels.
U.S. crude oil exports to China dropped to 112,000 barrels per day (bpd) in March, down sharply from 190,000 bpd a year earlier, according to vessel tracking data from Kpler.
At the same time, U.S. crude inventories rose by 2.6 million barrels last week, nearly double the 1.4-million-barrel increase forecast by analysts in a Reuters poll, government data showed on Wednesday.
Analysts at Macquarie said on Thursday they expect another build in U.S. crude stockpiles this week.
