Oil Prices Drop Amid Market Volatility

Oil prices slid as global markets faced risk-off sentiment, falling below $74 a barrel for West Texas Intermediate. Concerns over Chinese artificial-intelligence startup DeepSeek drove a sharp decline in U.S. stock markets, further pressuring oil. China’s economic slowdown and shrinking factory activity added to these challenges.

Trade Tensions Add Pressure on Oil

The Trump administration’s trade policies unsettled markets. Tariffs against Colombia and threats toward China, Canada, Mexico, and the EU amplified concerns. President Trump also urged OPEC to help reduce oil prices, arguing that lower prices could curb Russian revenues and impact the war in Ukraine.

Tight Physical Oil Market Provides Support

Despite recent drops, oil’s prices remain slightly higher this year. Cold weather and sanctions on Russian oil pushed refiners in Asia to secure alternative supplies. This demand has strengthened market indicators like timespreads, showing higher prices for near-term contracts compared to longer-term ones.

Expert Analysis on Market Resilience

Harry Tchilinguirian, group head of research at Onyx Capital Group, noted that despite expectations for a stronger price drop, market tightness is keeping Brent oil’s prices elevated. Brent spreads, reflecting short-term supply-demand imbalances, continue to indicate strength.

Production Changes Add Complexity

Iraq’s Rumaila oil’s field reduced output by about 300,000 barrels per day following a fire. However, rising production in Kazakhstan offset some of this loss. Kazakhstan’s output hit a record of over 2 million barrels per day, according to its energy ministry.