Brent and U.S. crude futures declined by over $2 a barrel, representing a drop of more than 3%, on Friday. This decrease was influenced by U.S. President Donald Trump’s warning of potential increased tariffs on China, which has raised concerns regarding the demand outlook in a market perceived to be oversupplied. “The sell-off was driven by a shift to risk-off markets following Trump’s post threatening tariffs on Chinese goods,” stated Giovanni Staunovo. Brent crude futures experienced a decline of $2.54, representing a 3.89% decrease, settling at $62.68 per barrel at 1:14 p.m., marking the lowest level since early May. U.S. West Texas Intermediate crude experienced a decline of $2.68, representing a decrease of 4.36%, settling at $58.83, marking the lowest point since early May.

“Today represents the convergence of multiple elements, with Trump’s recent threat of a substantial escalation in tariffs on China being the most recent factor,” stated Andrew Lipow. Production increases from OPEC, additional output gains in North and South America, and the reduction of geopolitical risk following the Gaza ceasefire agreement “are all factors that can be layered on top of Trump’s announcement this morning of tariffs on China,” Lipow stated. Trump, scheduled to meet Chinese President Xi Jinping in approximately three weeks in South Korea, expressed his concerns on social media regarding what he described as China’s intentions to leverage the global economy, following China’s significant expansion of export controls on rare earth elements on Thursday. China holds a commanding position in the market for these elements, which are crucial for technology manufacturing.

Alongside the potential cancellation of the meeting with Xi, Trump indicated the possibility of implementing a substantial rise in tariffs on Chinese imports. Israel and the Palestinian militant group Hamas reached a ceasefire agreement on Thursday, marking the initial phase of Trump’s initiative aimed at concluding the conflict in Gaza. Under the agreement ratified by Israel’s government on Friday, hostilities will come to an end, Israel will execute a partial withdrawal from Gaza, and Hamas will release all remaining hostages taken during the initial attack that triggered the conflict, in return for the release of hundreds of prisoners currently held by Israel. Since 2023, a significant number of vessels have faced attacks from the Iran-aligned Houthis in Yemen, who are targeting ships they associate with Israel, framing their actions as a show of solidarity with Palestinians amid the ongoing conflict in Gaza. The Gaza ceasefire agreement allows for a renewed emphasis on the forthcoming oil surplus, as OPEC continues to reverse its production cuts, according to Daniel Hynes.

The decision by the Organization of the Petroleum Exporting Countries and allies to implement a smaller-than-anticipated hike in output for November on Sunday alleviated some of the prevailing oversupply apprehensions. “Expectations in the markets for a significant increase in crude supply have not translated into notably reduced prices,” analysts noted on Friday. Concerns among investors are mounting regarding the potential impact of an extended U.S. government shutdown on the American economy, which could subsequently affect oil demand in the largest consumer of crude globally.