Crude oil futures edged lower this week despite fresh data showing China’s factory activity accelerated at its fastest pace in three months, a signal that typically boosts energy demand.
Analysts attributed the decline to mounting anxieties over escalating U.S.-China trade tensions and unresolved geopolitical risks in Europe, which overshadowed optimism about China’s industrial recovery.
China’s Purchasing Managers’ Index (PMI) rose to 52.1 in February, marking a third consecutive month of expansion and hinting at stronger crude consumption from the world’s top oil importer. Yet the gains failed to stabilize markets as traders braced for new U.S. tariffs targeting $3 billion in Chinese exports, set to take effect March 4. “China’s demand is a bright spot, but the specter of a trade war is dimming the outlook,” said a Singapore-based energy analyst, speaking anonymously due to company policy. “Tariffs could ripple through supply chains, dampening global growth and oil consumption.”
Geopolitical headwinds further muddied the waters. Hopes for a near-term peace deal in Ukraine faded as European leaders reaffirmed military support for Kyiv, while Russia’s energy exports continued to face Western sanctions. Although conflict-driven supply disruptions have historically buoyed oil prices, markets now appear more sensitive to the risk of prolonged economic stagnation. “Peace talks are stalled, and sanctions are here to stay,” noted a London-based commodities strategist. “This isn’t just about barrels—it’s about how demand crumbles if the global economy tips into recession.”
Brent crude hovered near $82 per barrel, down 1.8% for the week, while West Texas Intermediate (WTI) slipped to $78.50. The muted reaction to China’s PMI data underscores broader skepticism about sustained demand growth. Energy investors are increasingly hedging against a “worst-case scenario” where escalating tariffs and unresolved conflicts in Europe compound existing pressures, such as rising U.S. shale output and OPEC+ supply adjustments.
For now, the oil market remains trapped between cautious optimism and a minefield of risks. As one trader put it: “China’s engines are revving, but the road ahead is full of potholes.” With no clear resolution in sight for trade disputes or geopolitical strife, volatility is likely to define the weeks ahead.
