'Significant' Market Volatility Expected Amid Tariff Concerns

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Uncertainty surrounding U.S. trade policies suggests global oil consumption will slump, dragging on commodity prices, the U.S. government said.

U.S. President Donald Trump upended global markets with a volatile trade agenda. He's threatened stiff tariffs on many U.S. economic allies, only to reverse course. China and the U.S., meanwhile, are volleying tariffs back and forth daily. U.S. tariffs on China went from combined 104% to 125%, and then to 145%. China responded with its own tariffs, calling last week for a 125% tax on goods imported from the U.S.

The Energy Information Administration (EIA), the statistical branch of the U.S. Department of Energy, said uncertain trade policies forced it to re-run models for its monthly market report for April. With tariffs in mind, it lowered its forecast for global oil consumption by 400,000 barrels per day (BBL/d) to just 900,000 BBL/d.

"However, because the recent updates to trade policy widen the range of possible GDP growth outcomes, this forecast is subject to significant uncertainty," it said in a report published Thursday, two days later than expected.

Broader markets were highly volatile in the wake of so-called Liberation Day, when Trump unveiled his initial volley of tariffs. He reversed course, however, on Tuesday by dismantling some of the reciprocal tariffs, but escalated trade tensions with China, the second-largest economy in the world behind the U.S.

Markets boomed briefly after Trump's reversal, but have declined since. West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, was down more than 2% on the week, dipping to its lowest point since 2021.

"We expect that prices for crude oil and other commodities will continue to experience significant volatility as market participants assess the effects of trade policies," the EIA said.

EIA estimated that WTI would average $63.88 per barrel this year, an estimate that's nearly $7 per barrel lower than the forecast from the prior month. WTI opened on Friday at about $59.50 per barrel.

That's well below the point at which domestic drillers can make money. A March survey of energy firms by the Federal Reserve Bank of Dallas found companies need oil priced at $65 per barrel to make a profit.

"There cannot be 'U.S. energy dominance' and $50 per barrel oil; those two statements are contradictory," one respondent said.

Revisions, meanwhile, showed up for domestic crude oil production. In its monthly report for April, the EIA estimated total U.S. production would average 13.51 million BBL/d, down about 0.7% from the prior month's forecast.

Ole Hanson, the head of commodity strategy at Saxo Bank in Denmark, said in a Friday newsletter that broader markets may take the weekend to consider their options.

"With markets held hostage by the White House's erratic announcements, it's still too early to call a bottom for pro-cyclical commodities in the energy and industrial metals sectors," he wrote. "However, the tariff pause offers traders a moment to reassess the outlook, while trying to determine how much has already been priced in."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).