Market Insights

Oil Prices Face Biggest Weekly Drop Since October Amid Tariff Uncertainty and Supply Increases

Dupoin Markets Ltd · 07 Mar 202528.3K Views

Image Credit: Reuters

Oil prices showed little movement on Friday but were on track for their biggest weekly drop since October due to concerns over demand growth amid U.S. tariff policy uncertainty, coupled with expected increases in output from major producers.

Brent crude futures rose 17 cents, or 0.24%, to $69.63 per barrel by 0315 GMT, while U.S. West Texas Intermediate (WTI) futures gained 12 cents, or 0.18%, to $66.48 per barrel. However, for the week, Brent is down 4.9%, marking its largest weekly drop since the week of October 14. WTI is also set to decline by 4.8%, the biggest weekly fall since the same period.

Markets, including oil, have been volatile due to fluctuating U.S. trade policies, with the country being the world’s largest oil consumer. Vandana Hari, founder of Vanda Insights, stated, “It looks like financial markets are in panic mode, no longer easily calmed by Trump’s short-term tariff delays.” She added, “This has left crude stuck at four-month lows, with potential for further declines.”

On Thursday, U.S. President Donald Trump suspended the 25% tariffs on most goods from Canada and Mexico until April 2. However, tariffs on steel and aluminum remain in place, with the latter set to take effect on March 12. The amended tariff order does not fully cover Canadian energy products, which are subject to a separate 10% levy.

While tariffs themselves are seen as a drag on economic growth and oil demand, the uncertainty surrounding the policy is also slowing business decisions, impacting overall economic momentum. According to Fitch’s BMI research, "The risks to oil prices remain tilted to the downside with new supply from OPEC+ and non-OPEC producers expected to push the market into oversupply."

Brent prices had hit their lowest point since December 2021 on Wednesday, following a rise in U.S. crude inventories and OPEC+'s decision to increase output quotas. The group confirmed on Monday that it would proceed with a planned increase of 138,000 barrels per day in April.

However, some downward pressure on prices has eased as the U.S. considers measures to restrict exports from key OPEC producer Iran. U.S. Treasury Secretary Scott Bessent stated, “We are going to shut down Iran's oil sector and drone manufacturing capabilities.” Additionally, Reuters reported that Trump is considering a plan to inspect Iranian oil tankers at sea as part of his "maximum pressure" campaign to reduce Iranian oil exports to zero.