Oil Retreats as IEA Flags Trade War Risks to Global Demand

Oil fell after the International Energy Agency warned that consumption is under pressure from an escalating trade war, paring gains spurred by US inflation data, Bloomberg reported.

Brent futures traded below $71 a barrel, following a 2% jump on Wednesday, the biggest in two weeks. Global oil supply is likely to exceed demand by about 600,000 barrels a day this year, the IEA said. The weak outlook echoed pessimism from top traders at a major oil and gas conference in Houston.

Crude got a bump from data showing US consumer price increases at the slowest pace in four months, although economists anticipate that a trade war will also drive up prices on goods like food and clothing in the coming months. Stock markets slipped again on Thursday.

“We’re still trying to understand how everything will play out, but obviously the market is very focused on how escalating trade tensions may impact global economic growth,” said Toril Bosoni, head of the oil market division at the IEA. “What we’re seeing is an unusual level of uncertainty, not just on the demand side with tariffs and trade negotiations that are changing from day to day, but we’re also seeing quite a lot of uncertainty on the supply side,” she added, citing sanctions on major producers.

Crude has tumbled from a high in mid-January, as the risks of President Donald Trump’s trade policies threaten a wider economic slowdown and heighten volatility in wider markets.