【Crude Oil Special】Tariffs Deliver Severe Impact Oil Prices Swing Lower

On 10 October, U.S. President Trump announced that a 100% tariff will be imposed on a range of Chinese products starting 1 November. When combined with existing tariffs, the total tax rate for some products will exceed 130%, and export controls will be imposed on all key software. This move marks the official start of a new round of tariff conflicts, triggering a rise in market risk aversion and a corresponding drop in crude oil prices.

Tariff War Resumes Oil Prices Fall Again
In April 2025, tariff issues re-emerged as a focal point. Despite multiple previous consultations between the U.S. and China on the first round of tariffs, the outcomes mostly involved delayed implementation rather than substantive agreements. Starting 2 October, the U.S. launched a new round of targeted tariffs, focusing on livelihood and infrastructure sectors—for example, raising tariffs on patented and branded pharmaceuticals to 100%, tariffs on building materials such as kitchen cabinets, cupboards, and bathroom vanities to 25%, and tariffs on imported heavy-duty trucks to 25—further escalating trade tensions.

In response, China adopted tougher countermeasures, implementing comprehensive export controls on rare earth raw materials and related technologies and equipment, and imposing additional port service fees on all U.S.-flagged ships and vessels with U.S. investment backgrounds. Mutual sanctions between the two sides have further escalated the tariff issue, against which oil prices have continued to decline, breaking below the $60 mark and hitting a new low since the second half of the year.

Oversupply Worsens  Rate Cuts Fail to Revive Demand
On the supply side, OPEC+ continued to increase production in October, which is expected to push global crude oil inventory growth to over 1.5 million barrels per day in the fourth quarter of this year, intensifying oversupply pressures. Meanwhile, Ukraine’s attacks on Russia’s key energy infrastructure, coupled with Trump’s call for NATO allies to stop purchasing Russian crude and sanctions on India for its long-term purchases of Russian oil, have raised market concerns about the stability of Russian supply.

The demand side is equally grim. The United States, the world’s largest crude oil consumer, faces oversupply and weak demand, weighing on oil prices. EIA data shows that U.S. crude oil inventories have risen slightly in the past two weeks, mainly due to net imports dropping to historic lows while exports surged to a nearly two-year high. Rising inventories have sparked doubts about the momentum of U.S. crude oil consumption. Although Federal Reserve rate cuts are somewhat expected to boost crude oil demand, particularly from Asian regions, the policy focus is more on improving labor market conditions rather than directly stimulating demand growth.

Recently, the Russia-Ukraine conflict has once again become a market focus. Trump’s plan to provide Tomahawk missiles to Ukraine has, under this threat, led to a planned meeting between Putin and Trump in Hungary, with the timing yet to be determined. Based on statements from both U.S. and Russian presidents, the Russia-Ukraine issue is unlikely to ease in the short term, and any developments may be a phased transition to help Ukraine survive the winter.

Mai Dong, an Investment Strategist at Zhisheng Research(exclusively invited by Plotio), opined that the main contradiction in the current crude oil market remains the tariff war. While the meeting between the U.S. and Russian leaders may shift market attention, trading in the next two weeks will still revolve around tariff issues.

From a technical perspective, crude oil continues its downtrend on the weekly chart, further testing the $55 level. In the medium term, oil prices are likely to break below $55, approaching around $50.

[Important Disclaimer:The above content and views are provided by Zhisheng, a third-party cooperative platform, for reference only and do not constitute any investment advice. Investors who trade based on this information shall bear their own risks.]
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