Brent and U.S. crude futures dropped over $2 a barrel, or 3%, due to Trump’s tariff threat on China impacting demand in an oversupplied market, according to UBS analyst Giovanni Staunovo.

Brent crude settled at $62.73, down $2.49, while U.S. WTI crude finished at $58.90, down $2.61, the lowest since early May, as stated by Lipow Oil Associates President Andrew Lipow.

Trump’s threat to impose tariffs on Chinese goods led to a sell-off in oil prices, compounded by OPEC and American production increases, geopolitical risks, and a Gaza ceasefire agreement, explained Lipow.

Trump’s meeting with Chinese President Xi Jinping is in jeopardy after China expanded export controls on rare earth elements, which are crucial for tech manufacturing, prompting Trump to consider higher tariffs on Chinese goods.

Israel and Hamas reached a ceasefire in Gaza, with Israel partially withdrawing, Hamas releasing hostages, and the exchange of prisoners in a move seen as part of Trump’s initiative to end the conflict.

The Iran-aligned Houthis in Yemen have targeted vessels linked to Israel in solidarity with Palestinians over the Gaza conflict since 2023, causing concern about maritime security in the region.

The Gaza ceasefire allows OPEC to focus on the looming oil surplus, as production cuts are being rolled back, easing concerns of oversupply after a smaller-than-expected output hike by OPEC+ in November, according to ANZ analyst Daniel Hynes.

Read more at Yahoo Finance: Trump tariff threat pushes oil to five-month low