What's Affecting Oil Prices This Week? (April 7, 2025)

The price of Brent crude ended the week at $66.01 after closing the previous week at $72.54. The price of WTI ended the week at $62.32 after closing the previous week at $69.04. The price of DME Oman crude ended the week at $67.88. Since the markets closed on April 4, oil prices have continued to drop. At the time of this writing, the price of Brent crude has dropped below $64.

Oil prices broke sharply downward with two unexpected developments: the announcement of additional tariffs by the Trump Administration that were significantly greater in magnitude than expected coupled with members OPEC+ agreeing on April 3 to unwind their supply cuts at a greater extent in May than previously expected (411,000 bbl/d vs. 135,000 bbl/d). The last time the oil market saw a simultaneous shock to the demand side of the equation and the supply side of the equation was in 2020 during COVID-19 when Russia initially refused to participate in production cuts which resulted in the price of Brent crude falling below $30.

So, where next for oil prices? Before the recent events, we were forecasting that during 2Q and 3Q the price of Brent crude would move in the range between $75 and $80 and the price of WTI would move in the range between $70 and $75. The forecast was based on our expectation that demand would outstrip supply slightly during this period with demand growing mainly because of the improving situation in Asia (including China) coupled with strong demand in the US.  From the supply side we were expecting that OPEC+ would remain cautious in unwinding previous supply cuts and non-OPEC supply would increase by less than 1 MMbbl/d during 2025.

The biggest risk to this forecast has always been associated with the demand side and that risk rested mainly with demand growth in non-OECD countries, including those in Asia. Certainly, with the new round of announced tariffs, the demand side risk has increased notably. China is facing a dilemma – especially in the short term – because of its overdependence on exports – so fighting the tariffs with retaliatory tariffs that are likely to lead to even higher tariffs only puts these exports at more risk. China has been gaining a share of global exports, in part, because of falling producer prices further amplified by a depreciating currency. Doubling down on this strategy could put further pressure on its lagging domestic economy because China is a major importer of energy and other commodities that are, for the most part, priced in U.S. dollars. The U.S. economy will also be facing challenges with increased prices stemming from the tariffs. While the tariffs will have an impact on the U.S. economy, the U.S. economy has the flexibility to mitigate some of the impact. For instance, in some cases, U.S. consumers can shift to domestic substitutes and U.S. companies can shift production relatively quickly, including to domestic facilities with the manufacturing capacity rate in the U.S. running around 77% and the utilization rate in the automotive sector running even further below historical rates. Additionally, U.S. interest rates are moving downward with the 10-yr treasury falling below 4%, which will help offset some of the impact of the tariffs and provide room for the Federal Reserve to cut interest rates more aggressively. Regardless, both China and U.S. economies will be facing challenging times the longer the elevated tariffs stay in place – as well as other economies, including European economies – and emerging economies reliant on trade like Vietnam. Consequently, unless there is an abrupt change in the tariff strategy of the Trump Administration, there will be a hit to oil demand.

From the supply side, we are still expecting that OPEC+ will be proactive in adjusting supply to align with demand – despite the recent announcement of supply increases in May. Coupled with our expectation that the U.S. shale sector will not add any material volumes this year, we still think that OPEC+ can establish a floor under oil prices unless there is a spiraling escalation of the trade war that drives the global economy into a recession. The other caveat is that Saudi Arabia may push for more volume to drive oil prices down temporarily to encourage chronic overproducers (including Iraq and Kazakhstan) to reduce their supply to account for previous overproduction; however, we think this is unlikely.

With consideration of the above, we are expecting that the price of Brent crude will stay above $60 and will move back toward $70 as we progress through 2Q. From an upside perspective – a favorable resolution of the tariffs will push the price of Brent crude to $75 and the price of WTI to $70. From a downside perspective, a spiraling trade war could lead to the price of Brent crude breaking below $50 with it becoming more difficult for members of OPEC+ to maintain cooperation.

For a complete forecast of crude oil and refined products and other energy-related fundamentals and prices, please refer to our Short-term Outlook.

About the Author: John E. Paisie, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.