Oil Holds Ground as China Growth Battles Trump’s Greenland Tariff Plan

TLDR

• Brent crude traded around $64 per barrel while WTI stayed under $60 on Tuesday as markets assessed multiple competing factors
• Trump announced tariffs of 10% on eight European nations from February 1, rising to 25% by June 1 without a Greenland agreement
• China’s economy grew 5.0% in 2025 with crude oil production up 1.5%, providing support to oil demand outlook
• Supply surplus warnings from the International Energy Agency continue to pressure prices as OPEC+ increases production
• Physical market issues in Kazakhstan’s Tengiz field and Caspian Pipeline Consortium port create regional supply constraints

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Oil prices remained relatively unchanged on Tuesday as traders balanced geopolitical tensions against positive economic signals. Brent crude futures held near $64 per barrel while West Texas Intermediate stayed below $60.

Brent Crude Oil Last Day Financ (BZ=F)

Markets responded to President Trump’s renewed campaign to acquire Greenland from Denmark. His push has created friction with European partners and sparked fears of escalating trade disputes.

Trump outlined plans for new tariffs targeting eight European countries. The levies would start at 10% on February 1 and affect Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain.

Without a deal on Greenland, these tariffs would jump to 25% on June 1. Trump told reporters “we have to have it” when discussing the island before his scheduled speech at the World Economic Forum in Davos.

The tariff announcement has weakened the US dollar and increased market volatility. PVM analyst Tamas Varga noted the tariffs would not have an immediate impact on the oil balance.

Chinese Growth Lifts Sentiment

China published economic data on Monday revealing 5.0% GDP growth for 2025. The results exceeded analyst expectations and helped support crude prices.

The world’s largest oil importer also reported a 1.5% increase in crude oil production year-on-year. IG market analyst Tony Sycamore said this resilience in China provided a lift to demand sentiment.

The International Monetary Fund recently raised its global economic growth forecast for this year. Stronger diesel prices also contributed to support for crude markets.

Oversupply Warnings Create Headwinds

Oil markets face ongoing pressure from concerns about excess supply. OPEC+ members have been raising production levels while physical crude grades in the Middle East show price declines.

The International Energy Agency has consistently warned about a potential glut in 2025. The agency will release its latest market analysis on Wednesday.

Warren Patterson from ING Groep NV said the outlook for a large surplus suggests prices should trend lower. He added that potential escalation in US-EU tensions poses further downside risk.

Mukesh Sahdev from XAnalysts Pty Ltd expects markets will find a compromise. He believes the US holds an advantage in any prolonged dispute due to its economic strength and energy supply position.

A weaker dollar and firm timespreads have provided some relative support despite broader risk-off moves. The pricing differentials between months indicate some underlying strength.

Regional Supply Tightness Emerges

Certain physical markets are experiencing supply constraints. The Caspian Pipeline Consortium port in the Black Sea is dealing with operational issues.

Kazakhstan’s giant Tengiz oil field is also facing problems. These disruptions are creating a near-term shortage of crude from the Mediterranean region.

Markets are monitoring Venezuela’s oil sector after Trump said the US would control the industry following Nicolas Maduro’s capture. Trading house Vitol offered Venezuelan crude to Chinese buyers at approximately $5 per barrel discounts to ICE Brent for April delivery.

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