Oil Slips as Fed, Trump Send Conflicting Market Signals
Oil prices fell below $71 a barrel on Thursday after a day of uncertainty triggered by contrasting messages from the Federal Reserve and President Donald Trump. Brent crude dropped sharply, erasing earlier gains, while US equity futures reversed course as traders digested the mixed signals.
Fed Chair Jerome Powell highlighted the unpredictability of Trump’s trade policies. He also noted the central bank is in no rush to cut interest rates, a stance that dampened market hopes for monetary easing.
Trump Pushes for Rate Cuts to Offset Tariff Effects
In contrast, Trump reiterated his call for lower borrowing costs. His administration continues to escalate its global tariff push, raising concerns about slowing growth and weakening demand for commodities like oil.
Fed projections now indicate lower economic growth but higher inflation expectations. The bond market responded quickly, pricing in an increased chance of rate cuts later in the year.
Oil Markets Hit by Bearish Headwinds
Oil remains well below its mid-January highs. Prices are being pressured by a combination of bearish forces: slowing demand due to trade friction, and the planned increase in oil output from OPEC and its allies starting in April.
The trade war is casting a shadow over the global economic outlook. Each round of tariffs and countermeasures adds further risk to already shaky demand forecasts for oil.
Analysts Expect Ongoing Oil Price Volatility
“US tariff news is likely to keep oil prices volatile,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “That said, we retain our moderately constructive outlook for crude prices.”
While there is short-term uncertainty, some analysts still expect a moderate recovery in oil prices by mid-year, depending on trade developments and OPEC+ discipline.
US Inventory Data Offers Mixed Signals
Despite the macroeconomic noise, recent US inventory data offered a bit of support to oil bulls. Gasoline inventories fell to their lowest level since early January. Distillates, which include diesel, also saw declines.
Crude stockpiles did increase but by less than expected, and key storage levels at Cushing, Oklahoma — the delivery hub for WTI — declined. These shifts indicate demand may still be relatively healthy, even as broader concerns mount.
Outlook for Oil Prices Hinges on Macro Trends
Oil traders are closely watching developments in US fiscal and trade policy. With Trump ramping up pressure for aggressive tariffs and the Fed showing restraint on rate cuts, the tug-of-war in economic policy is set to drive further price swings.
Energy markets remain at the mercy of geopolitics, macro data, and policy headlines. For now, oil is caught between supply increases, trade war fears, and central bank caution — a mix that ensures continued volatility.