Tariff war: Oil prices fall despite Trump pause

Oil prices have failed to sustain earlier relief following President Donald Trump's announcement of a 90-day pause on reciprocal tariffs on most countries. The market remains concerned about the deepening U.S.-China trade war and the potential for a global recession. Kola Karim, the Chairman of Shoreline Group, recently joined CNBC Africa to analyze the dynamics at play and provide insights into the current pricing reality for oil. The outlook for oil pricing remains uncertain as the ongoing tariff dispute between the United States and China continues to impact market sentiment. Goldman Sachs has revised its December forecast for oil prices downward by $5 for both Brent and WTI crude oil. The investment bank also anticipates that price volatility will remain high due to increased recession risks. Karim emphasized that the duration of the tariff conflict will significantly influence oil prices. If the issue persists, China may reduce consumption and production for export, leading to a slowdown in the United States as well. This scenario could result in a substantial price drop of up to $5. However, a prompt resolution within the 90-day timeframe could trigger a reversal and price recovery. The Chairman highlighted the importance of swift resolution to avoid a global recession that could adversely impact economies worldwide. He underscored the interconnected nature of the global economy, noting that the repercussions of the U.S.-China trade dispute extend far beyond the two countries involved. Karim emphasized the critical balance between increasing oil production to meet budgetary targets and the downward pressure on oil prices. Countries like Nigeria, Libya, and Angola are striving to boost production to sustain their economies amid price declines. Failure to meet production targets could exacerbate budget shortfalls and economic challenges, underscoring the urgent need for a resolution to the tariff war. On the supply side, OPEC and its allies have chosen to maintain production levels despite concerns about weakening demand growth. S&P's worst-case scenario forecasts a significant reduction in oil demand growth, potentially slashing it by 500,000 barrels per day. Karim highlighted the global trend towards increasing oil production to mitigate the impact of falling prices and support national budgets heavily reliant on oil revenues. The delicate balance between production targets, market demand, and geopolitical factors underscores the complexity of the current oil market landscape. In conclusion, the ongoing tariff war between the United States and China poses a significant threat to global oil prices and economic stability. The interconnected nature of the global economy underscores the need for a swift resolution to prevent a widespread recession. As oil-producing countries seek to boost production to offset price declines, the delicate balance between supply and demand remains a key concern. The coming months will be critical in determining the trajectory of oil prices and the broader economic outlook amidst escalating trade tensions.